Certain OP Units issued in the Combination to the former owners of JBG/Operating Partners, L.P. are subject to post-combination vesting over a period of 60 months based on continued employment. Compensation expense for these OP Units is recognized over the graded vesting period through July 2022.

The total-grant date fair value of the OP Units that vested for each of the three years in the period ended December 31, 2021 was $36.0 million, $45.1 million and $4.3 million.

On June 23, 2017, our Board of Trustees adopted the JBG SMITH 2017 Omnibus Share Plan (the "Plan"), effective as of July 17, 2017, and authorized the reservation of 10.3 million of our common shares pursuant to the Plan. In April 2021, our shareholders approved an amendment to the Plan to increase the common shares reserved under the Plan by 8.0 million. As of December 31, 2021, there were 8.9 million common shares available for issuance under the Plan.

The formation awards issued in the Combination ("Formation Awards") were structured in the form of profits interests in JBG SMITH LP that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the volume-weighted average price of a common share at the time the formation unit was granted. The Formation Awards, subject to certain conditions, generally vest 25% on each of the third and fourth anniversaries and 50% on the fifth anniversary of the date granted, subject to continued employment. Compensation expense for these awards is being recognized over a five-year period through July 2022.

The value of vested Formation Awards is realized through conversion of the award into a number of LTIP Units, and subsequent conversion into a number of OP Units determined based on the difference between the volume-weighted average price of a common share at the time the Formation Award was granted and the value of a common share on the conversion date. The conversion ratio between Formation Awards and LTIP Units, which starts at zero, is the quotient of:

(i) the excess of the value of a common share on the conversion date above the per share value at the time the Formation Award was granted over (ii) the value of a common share as of the date of conversion. Formation Awards have a finite 10-year term over which their value is allowed to increase and during which they may be converted into LTIP Units (and in turn, OP Units). Holders of Formation Awards will not receive distributions or allocations of net income (net loss) prior to conversion to LTIP Units.

The total-grant date fair value of the Formation Awards that vested for each of the three years in the period ended December 31, 2021 was $6.0 million, $6.9 million and $1.4 million.

During each of the three years in the period ended December 31, 2021, we granted to certain employees 498,955, 381,504 and 351,982 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") with a weighted average grant-date fair value of $29.21, $38.52 and $34.26 per unit that primarily vest over four years subject to continued employment. Compensation expense for these units is being recognized over a four-year period.

Additionally, in July 2021, we granted to certain employees as part of a long-term retention incentive award 608,325 Time-Based LTIP Units with a weighted average grant-date fair value of $31.73 per unit that vest 50% on the fifth anniversary of the grant date and 25% on each of the sixth and seventh anniversaries of the grant date, subject to continued employment. Compensation expense for these units is being recognized over a seven-year period.

During each of the three years in the period ended December 31, 2021, we granted 163,065, 90,094 and 91,636 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonus, related to prior service, as LTIP Units. The LTIP Units had a grant-date fair value of $29.54, $40.13 and $34.21 per unit.

During each of the three years in the period ended December 31, 2021, as part of their annual compensation, we granted to non-employee trustees a total of 71,792, 54,607 and 50,159 fully vested LTIP Units with a grant-date fair value of $26.31, $28.38 and $36.28. The LTIP Units may not be sold while a trustee is serving on the Board of Trustees.

The aggregate grant-date fair value of the Time-Based LTIP Units and LTIP Units granted (collectively "Granted LTIPs") for each of the three years in the period ended December 31, 2021 was $40.6 million, $19.9 million and $17.0 million. Holders of the Granted LTIPs and the Time-Based LTIP Units issued in 2018 related to our successful pursuit of Amazon's new headquarters ("Special Time-Based LTIP Units") have the right to convert vested units into OP Units, which are then subsequently exchangeable for our common shares. Granted LTIPs and Special Time-Based LTIP Units do not have redemption rights, but any OP Units into which units are converted are entitled to redemption rights. Granted LTIPs and Special Time-Based LTIP Units, generally, vote with the OP Units and do not have any separate voting rights except in connection with actions that would materially and adversely affect the rights of the Granted LTIPs and Special Time-Based LTIP Units. The Granted LTIPs were valued based on the closing common share price on the date of grant, less a

discount for post-grant restrictions. The discount was determined using Monte Carlo simulations, and the following is a summary of the significant assumptions used to value the Granted LTIPs:

The following is a summary of the Granted LTIPs and Special Time-Based LTIP Units activity:

The total-grant date fair value of the Granted LTIPs and Special Time-Based LTIP Units that vested for each of the three years in the period ended December 31, 2021 was $19.1 million, $15.3 million and $12.0 million.

During each of the three years in the period ended December 31, 2021, we granted to certain employees 627,874, 593,100 and 478,411 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") with a weighted average grant-date fair value of $15.14, $18.67 and $19.49 per unit.

Performance-Based LTIP Units are performance-based equity compensation pursuant to which participants have the opportunity to earn LTIP Units based on the relative performance of the total shareholder return ("TSR") of our common shares compared to the companies in the FTSE Nareit Equity Office Index, over the defined performance period beginning on the grant date, inclusive of dividends and stock price appreciation.

Our Performance-Based LTIP Units have a three-year performance period. 50% of any Performance-Based LTIP Units that are earned vest at the end of the three-year performance period and the remaining 50% vest on the fourth anniversary of the date of grant, subject to continued employment. If, however, the Performance-Based LTIP Units do not achieve a positive absolute TSR at the end of the three-year performance period, but achieve at least the threshold level of the relative performance criteria thereof, 50% of the units that otherwise could have been earned will be forfeited, and the remaining units that are earned will vest if and when we achieve a positive TSR during the succeeding seven years, measured at the end of each quarter. Compensation expense for these units is generally being recognized over a four-year period.

Additionally, in July 2021, we granted to certain employees as part of a long-term retention incentive award 844,070 Performance-Based LTIP Units with a weighted average grant-date fair value of $23.08 per unit that vest 50% on the fifth anniversary of the grant date and 25% on each of the sixth and seventh anniversaries of the grant date, subject to continued employment, based on our achievement of four share price targets during the performance period commencing on the first

anniversary of the grant date and ending on the sixth anniversary of the grant date. Compensation expense for these units is being recognized over a seven-year period.

The aggregate grant-date fair value of the Performance-Based LTIP Units granted for each of the three years in the period ended December 31, 2021 was $29.0 million, $11.1 million and $9.3 million, valued using Monte Carlo simulations. The following is a summary of the significant assumptions used to value the Performance-Based LTIP Units:

(1)

Primarily represents the Performance-Based LTIP Units granted in February 2018. Based on our relative performance and absolute TSR over the three-year performance period, all of the outstanding units were earned, with half of the units vesting at the end of the performance period and the remaining half vesting in February 2022.

(2)	Includes 506,182 Performance-Based LTIP Units issued in 2018 related to our successful pursuit of Amazon’s new headquarters ("Special Performance-Based LTIP Units") that were forfeited in November 2021 as the performance measures were not met.

(3)	In January 2022, 469,624 Performance-Based LTIP Units, which were unvested as of December 31, 2021, were forfeited as the performance measures were not met.

The total-grant date fair value of the Performance-Based LTIP that vested for the year ended December 31, 2021 and 2020 was $5.1 million and $4.6 million.

RSUs

In January 2021, we granted to certain non-executive employees 22,194 RSUs with time-based vesting requirements ("Time-Based RSUs") with a weighted average grant-date fair value of $31.52 per unit and 13,516 RSUs with performance-based vesting requirements ("Performance-Based RSUs") with a weighted average grant-date fair value of $15.16 per unit. Vesting requirements and compensation expense recognition for the Time-Based RSUs and the Performance-Based RSUs are similar to those of the Time-Based LTIP Units and Performance-Based LTIP Units granted in 2021.

The aggregate grant-date fair value of the RSUs granted during the year ended December 31, 2021 was $905,000. The Time-Based RSUs were valued based on the closing common share price on the date of grant and the Performance-Based RSUs were valued using Monte Carlo simulations with the same significant assumptions used to value the Performance-Based LTIP Units above.

The following is a summary of the RSUs activity:


	Time-Based RSUs			Performance-Based RSUs
		Weighted			Weighted
	Unvested	Average Grant-		Unvested	Average Grant-
	Shares	Date Fair Value		Shares	Date Fair Value
Unvested as of December 31, 2020	—	$	—	—	$	—
Granted	22,194		31.52	13,516		15.16
Forfeited	(616)		32.44	—		—
Unvested as of December 31, 2021	21,578		31.50	13,516		15.16

ESPP

The ESPP authorized the issuance of up to 2.1 million common shares. The ESPP provides eligible employees an option to contribute up to $25,000 in any calendar year, through payroll deductions, toward the purchase of our common shares at a discount of 15.0% of the closing price of a common share on relevant determination dates. As of December 31, 2021, there were 1.9 million common shares available for issuance under the ESPP.

Pursuant to the ESPP, employees purchased 64,321, 68,047 and 47,022 common shares for $1.6 million, $1.7 million and $1.5 million during each of the three years in the period ended December 31, 2021. The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model:


	Year Ended December 31,
	2021	2020	2019
Expected volatility	22.0% to 39%	13.0% to 67.0%	18.0% to 28.0%
Dividend yield	1.5% to 3.1%	1.1% to 3.3%	2.6% to 3.5%
Risk-free interest rate	0.1%	0.1% to 1.7%	2.2% to 2.4%
Expected life	6 months	6 months	6 months

Share-Based Compensation Expense

The following is a summary of share-based compensation expense:


	Year Ended December 31,
	2021		2020		2019

	(In thousands)
Time-Based LTIP Units	$	16,705	$	14,018	$	11,386
Performance-Based LTIP Units		13,101		17,815		8,716
LTIP Units		1,091		1,100		1,000
Other equity awards ⁽¹⁾		7,355		6,024		4,535
Share-based compensation expense - other		38,252		38,957		25,637
Formation Awards		2,874		4,242		5,734
OP Units and LTIP Units ⁽²⁾		7,927		21,836		30,282
Special Time-Based LTIP Units and Special Performance-Based LTIP Units		5,524		5,600		6,146
Share-based compensation related to Formation Transaction and special equity awards ⁽³⁾		16,325		31,678		42,162
Total share-based compensation expense		54,577		70,635		67,799
Less: amount capitalized		(3,026)		(4,584)		(2,526)
Share-based compensation expense	$	51,551	$	66,051	$	65,273

(1)	Primarily comprising compensation expense for: (i) fully vested LTIP Units issued to certain employees in lieu of all or a portion of any cash bonus earned, (ii) RSUs and (iii) shares issued under our ESPP.

(2)	Represents share-based compensation expense for LTIP Units and OP Units issued in the Formation Transaction, which are subject to post-Combination employment obligations.

(3)	Included in "General and administrative expense: Share-based compensation related to Formation Transaction and special equity awards" in the accompanying consolidated statements of operations.

As of December 31, 2021, we had $62.6 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 3.6 years.

Employee Benefits

We have a 401(k) defined contribution plan covering substantially all of our officers and employees which permits participants to defer compensation up to the maximum amount permitted by law. We provide a discretionary matching contribution. Employees' contributions, which vests after one year of service. Our contributions for each of the three years in the period ended December 31, 2021 were $2.4 million, $2.2 million and $2.0 million.

2022 Grants

Beginning in 2022, certain employees were granted performance-based, appreciation-only LTIP Units ("AO LTIP Units"). The AO LTIP Units are structured in the form of profit interests that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the participation threshold of $32.30. The AO LTIP Units have a three-year performance period. 50% of any AO LTIP Units that are earned vest at the end of the three-year performance period and the remaining 50% vest on the fourth anniversary of the date of grant, subject to continued employment. The AO LTIP Units are subject to a TSR modifier whereby the number of AO LTIP Units that will ultimately be earned will be increased or reduced by as much as 25%. In January 2022, we granted 1.5 million AO LTIP Units, 702,888 Time-Based LTIP Units, 21,705 Performance-Based LTIP Units and 39,536 Time-Based RSUs to certain employees with an estimated aggregate grant-date fair value of $27.3 million.

In February 2022, we granted 252,206 fully vested LTIP Units, with a total grant-date fair value of $5.6 million, to certain employees who elected to receive all or a portion of their cash bonus earned, related to 2021 service, as LTIP Units.