Share-Based Payments

3 Months Ended

Mar. 31, 2024

Share-Based Payments

Share-Based Payments

11.Share-Based Payments

LTIP Units and Time-Based LTIP Units

In January 2024, we granted to certain employees 974,140 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and a weighted average grant-date fair value of $15.93 per unit that primarily vest ratably over four years subject to continued employment. Compensation expense for these units is primarily being recognized over a four-year period.

In January 2024, we granted 209,047 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonuses related to 2023 service as LTIP Units. The LTIP units had a grant-date fair value of $14.27 per unit. Compensation expense totaling $3.0 million for these LTIP Units was recognized in 2023.

The aggregate grant-date fair value of the Time-Based LTIP Units and the LTIP Units granted during the three months ended March 31, 2024 was $18.5 million. The Time-Based LTIP Units and the LTIP Units were valued based on the closing common share price on the grant date, less a discount for post-grant restrictions. The discount was determined using Monte Carlo simulations based on the following significant assumptions:

Expected volatility	35.0%
Risk-free interest rate	4.4% to 4.6%
Post-grant restriction periods	2 years

In April 2024, as part of their annual compensation, we granted to non-employee trustees a total of 141,422 fully vested LTIP Units with a grant-date fair value of $12.40 per unit, which includes LTIP Units elected in lieu of cash retainers. The LTIP Units may not be sold while a trustee is serving on the Board of Trustees.

Appreciation-Only LTIP Units ("AO LTIP Units")

In January 2024, we granted to certain employees 1.9 million performance-based AO LTIP Units with a grant-date fair value of $3.79 per unit. The AO LTIP Units 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 $18.93. 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 25%. The AO LTIP Units have a three-year performance period with 50% of the AO LTIP Units earned vesting at the end of the three-year performance period and the remaining 50% vesting on the fourth anniversary of the grant date, subject to continued employment. The AO LTIP Units expire on the tenth anniversary of their grant date.

The aggregate grant-date fair value of the AO LTIP Units granted during the three months ended March 31, 2024 was $7.1 million, valued using Monte Carlo simulations based on the following significant assumptions:

Expected volatility	32.0%
Dividend yield	3.2%
Risk-free interest rate	4.1%

Restricted Share Units ("RSUs")

In January 2024, we granted to certain non-executive employees 74,842 time-based RSUs ("Time-Based RSUs") with a grant-date fair value of $17.21 per unit. Vesting requirements and compensation expense recognition for the Time-Based RSUs are primarily consistent with those of the Time-Based LTIP Units granted in 2024.

The aggregate grant-date fair value of the RSUs granted during the three months ended March 31, 2024 was $1.3 million. The Time-Based RSUs were valued based on the closing common share price on the date of grant.

ESPP

Pursuant to the ESPP, employees purchased 21,401 common shares for $292,000 during the three months ended March 31, 2024, valued using the Black-Scholes model based on the following significant assumptions:

Expected volatility	48.0%
Dividend yield	4.2%
Risk-free interest rate	5.3%
Expected life	3 months

Share-Based Compensation Expense

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

	Three Months Ended March 31,
	2024		2023
	(In thousands)
Time-Based LTIP Units	$	5,472	$	5,532
AO LTIP Units and Performance-Based LTIP Units		3,478		3,660
Other equity awards (1)		1,044		1,536
Share-based compensation expense - other		9,994		10,728
Share-based compensation related to Formation Transaction and special equity awards (2)		—		351
Total share-based compensation expense		9,994		11,079
Less: amount capitalized		(456)		(651)
Share-based compensation expense	$	9,538	$	10,428

(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 bonuses earned, (ii) RSUs and (iii) shares issued under our ESPP.

(2) Included in "General and administrative expense: Share-based compensation related to Formation Transaction and special equity awards" in our statement of operations. Includes share-based compensation expense for awards issued in connection with the Formation Transaction and with our successful pursuit of Amazon's additional headquarters in National Landing all of which were fully expensed as of December 31, 2023.

As of March 31, 2024, we had $40.8 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 2.4 years.

In April 2024, our shareholders approved an amendment to the JBG SMITH 2017 Omnibus Share Plan, as amended, (the "Plan") to increase the common shares reserved for issuance under the Plan by 7.5 million common shares.