Upon the issuance of Host Inc.’s common stock for stock-based compensation, Host L.P. issues to Host Inc. common OP units of an equivalent value. Accordingly, these awards and related disclosures are included in both Host Inc.’s and Host L.P.’s consolidated financial statements.

Host Inc. maintains two stock-based compensation plans, the Comprehensive Stock and Cash Incentive Plan (the “2020 Comprehensive Plan”), under which Host Inc. may award to participating employees restricted stock units (“RSUs”), and the

Employee Stock Purchase Plan. At December 31, 2022, there were approximately six million shares of Host Inc.’s common stock reserved and available for issuance under the 2020 Comprehensive Plan.

We recognize costs resulting from share-based payments in our financial statements over their vesting periods. No compensation cost is recognized for awards for which employees do not render the requisite services. We classify share-based payment awards granted in exchange for employee services as either equity-classified or liability-classified awards. Equity-classified awards are measured based on their fair value as of the date of grant. In contrast, liability-classified awards are re-measured to fair value each reporting period.

During 2022, 2021 and 2020, we recorded stock-based compensation expense of approximately $26 million, $18 million and $17 million, respectively. Shares granted in 2022, 2021 and 2020 totaled 1.8 million, 3.0 million and 2.2 million, respectively, while 1.5 million, 1.1 million and 1.2 million shares, respectively, vested during those years.

During 2022, Host Inc. granted 1.6 million RSU awards under the 2020 Comprehensive Plan, which amount represents the maximum number of RSUs that can be earned during the period of 2022 through 2025 if performance is at the “high” level of achievement and, for time-based awards, the executive remains employed. The RSUs vest over a one, two or three-year period and 3.4 million RSUs were unvested at December 31, 2022. Total unrecognized compensation expense related to unvested RSU awards that vest through 2025 is approximately $19 million.

Vesting of RSUs awarded in 2022 is based on (1) continued employment on the vesting date (“Time-Based Award”); (2) the achievement of relative total shareholder return (“TSR”); and (3) our Adjusted EBITDAre performance. Approximately 25% of the RSUs are Time-Based Awards and vest on an annual basis over three years; approximately 37.5% of the RSUs are based on the satisfaction of the TSR compared to the NAREIT Equity Lodging & Resort index that serves as a relevant industry/asset specific measurement to our competitors and vest following a three-year performance period; and the remaining 37.5% are based on Adjusted EBITDAre performance and vest following a three-year performance period. The RSUs granted are considered equity-classified awards. As a result, the fair value of these awards is based on the fair value on the grant date, and such grant date fair value is not adjusted for subsequent movements thereof.

We value the time-based awards using the closing stock price on the grant date multiplied by the percentage of shares expected to be released, which is 100% of the time based awards. We also value the Adjusted EBITDAre awards using the closing stock price on the grant date multiplied by the percentage of shares expected to be released; however, as a result of the Adjusted EBITDAre performance conditions, we reevaluate the percentage based on the probability of meeting the performance conditions each period. We value the TSR awards using the economic theory that is the basis for all valuation models, including Binominal, Black-Scholes, exotic options formulas, and Monte Carlo valuations. We valued the TSR awards with the following assumptions:


	NAREIT Lodging & Resorts Index
	2022 Award Grants			2021 Award Grants
Grant date stock price	$	18.45		$	14.13
Volatility		45.0	%		43.2	%
Beta		0.667			0.669
Risk-free rate - three year award		1.61	%		0.18	%

In making these assumptions, we base the expected volatility on the historical volatility over three years using daily stock price observations. The beta is calculated by comparing the risk of our stock to the risk of the applicable peer group index, using three years of daily price data. We base the risk-free rate on the Treasury bond yields corresponding to the length of each performance period as reported by the Federal Reserve.

During 2022, 2021 and 2020, we recorded compensation expense of approximately $23 million, $16 million and $15 million, respectively, related to the RSU awards to senior executives. The following table is a summary of the status of our senior executive plans for the three years ended December 31, 2022:


	Year ended December 31,
	2022					2021					2020
	Shares (in millions)			Fair Value (per share)		Shares (in millions)			Fair Value (per share)		Shares (in millions)			Fair Value (per share)
Balance, at beginning of year		3.2		$	12		1.6		$	10		1.2		$	13
Granted ⁽¹⁾		1.6			17		2.7			14		2.0			10
Vested ⁽²⁾		(1.3	)		16		(0.9	)		17		(1.1	)		15
Forfeited/expired		(0.1	)		16		(0.2	)		17		(0.5	)		15
Balance, at end of year		3.4			15		3.2			12		1.6			10
Issued in calendar year ⁽²⁾		0.5			17		0.6			15		0.4			19

___________

(1)

Shares granted in 2022 and 2021 include a portion of three-year performance awards granted during each of 2022 and 2021. The performance goals for the subsequent years are not set at the time of the agreement and, therefore, the portion of the awards related to those periods do not have a grant date fair value for accounting purposes and are not included in the chart above.

(2)

Shares that vest at December 31 of each year are issued to the employees in the first quarter of the following year, although the requisite service period is complete. Accordingly, the 0.5 million shares issued in 2022 include shares vested at December 31, 2021, after adjusting for shares withheld to meet employee tax requirements. The shares withheld for employee tax requirements were valued at $8 million, $7 million and $5.5 million for 2022, 2021 and 2020, respectively.

In addition to the share-based plans described above, we maintain an upper-middle management plan and an employee stock purchase plan. The upper-middle management awards are time-based, equity-classified awards that vest within three years of the grant date and compensation expense is recognized over the life of the award based on the grant date fair value. Through the employee stock purchase plan, employees can purchase stock at a discount of 10% of the lower of the beginning and ending stock price each quarter. During 2022, 2021 and 2020, we granted a total of 0.2 million shares, 0.3 million shares and 0.2 million shares, respectively, under these two programs and recorded compensation expense of approximately $3 million, $2 million and $2 million, respectively.