Miami Heat Sign Dion Waiters to 2-Year, $5.9 Million Deal

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Pat Riley wasn’t expecting to use the Miami Heat’s $2.898 million mid-level exception for room teams this summer.

“As far as the $2.9 million room exception, we’re going to hold on to that,” Riley said on July 16. “I don’t think we’re going use it for the rest of the summer. There isn’t anybody out there right now that I want to give it to.”

Little did he know, things would dramatically change just two days later.

There had been mutual interest between Riley and Oklahoma City Thunder free agent shooting guard Dion Waiters since the start of free agency. Any such possibilities, however, were rendered effectively meaningless by virtue the fact that he was a restricted free agent.

Waiters’ restricted free agent status caused two serious problems for Riley(1).

First, it meant that Riley would need to offer a contract that would not only be acceptable to Waiters, but also one that would be high enough such that he could be relatively certain the Thunder would not match. The Thunder, at the time, were expected to match any reasonable offer.

Second, it meant the contract would need to be for at least two seasons in length (not including any option years).

The combination made a Heat pursuit of Waiters effectively impossible. Any first-year salary that, at the start of free agency, figured to be high enough to entice the Thunder not to match would also need to contain a second-year salary high enough to destroy any of the Heat’s grand visions for the summer of 2017. The Heat has big plans for that summer. 

The 2017 free agent class is loaded.

The list of players who can be unrestricted free agents includes: point guards Stephen Curry, Russell Westbrook, Chris Paul and Kyle Lowry; shooting guard J.J. Redick; small forwards Kevin Durant, LeBron James (if he signs another one-year deal this summer) and Gordon Hayward; and power forwards Blake Griffin, Serge Ibaka, Paul Millsap and Greg Monroe.

The key targets in the bunch: Durant (if available), Westbrook or Hayward.

And so, despite mutual interest, initial conversations between Waiters and the Heat went nowhere.

In order to make Waiters a restricted free agent, Oklahoma City tendered Waiters a $6.8 million qualifying offer on June 27. Waiters was free to accept that qualifying offer at any time thereafter, and play out the season with the Thunder at the corresponding salary.

But he held off. He seemed destined to sign a sizable contract, especially with all the huge money being thrown around. Several interested teams, however, convinced of the Thunder’s determination to match an offer sheet, were reluctant to commit to signing him.

As his wait grew longer, and as salary cap space throughout the NBA began to dry up, the prospect of him accepting his qualifying offer became increasingly likely. Realizing this, the Thunder rescinded the offer on July 18, a full five days prior to its July 23 deadline to unilaterally do so, in order to prevent the possibility.

The Thunder simply couldn’t afford to allow Waiters to accept his qualifying offer. The $6.8 million salary would have reduced its cap room to the point where it could no longer offer its star player, Westbrook, a renegotiated salary up to the $26.5 million maximum in exchange for an extension of his contract. While it remains unclear if Westbrook will accept such a renegotiation and extension, having the flexibility to offer it became paramount after the departure of Durant. The Thunder has in mind to build its future around Westbrook, and wasn’t about to throw away the possibility to secure that future because of Waiters.

Rescinding the qualifying offer made Waiters an unrestricted free agent. When that happened, the Heat struck, offering the only tool it had left in its arsenal above the minimum salary.

Waiters officially executed a two-year, $5.9 million contract with the Heat on Monday. It will pay out $2.9 million this season, with a player option for the 2017-18 season at $3.0 million.

It was a shocking conclusion to a wild summer for Waiters. The Thunder’s $6.8 million qualifying offer remained on the table for 21 days before it was withdrawn. Waiters could’ve accepted at any time. By not doing so, he ultimately cost himself $3.9 million in salary for this season.

The Heat, in turn, snagged him at a bargain price – well below any initial projections for his value on the open market this summer. It was a calculated move for Miami, made in large part because that depressed valuation meant that the player option, even if exercised, would not materially alter the team’s flexibility for the summer of 2017.

Waiters’ interest in Miami lies in his belief that it represents the best opportunity for himself to see meaningful playing time in an environment in which he can thrive, thus building up his value for next summer. To do so, he will need to prove he can be a reliable player in Miami – something he hasn’t shown in Cleveland or Oklahoma City.

If he does, he will ultimately decline his player option and enter free agency next summer, in which case it will have no impact on the Heat’s summer of 2017 flexibility.

If he doesn’t, and he ultimately becomes relegated to the role of journeyman guard playing a minimal role for the Heat this season, he may elect to exercise his player option, which would reduce the Heat’s summer of 2017 cap space by $3.0 million.

The salary cap for the 2017-18 NBA season is currently projected to reach $102 million.

Excluding Waiters, the Heat has just eight players locked in for the 2017-18 season (including Justise Winslow’s first team option, which the Heat will surely exercise by the upcoming October 31st deadline; Josh Richardson’s non-guaranteed salary, whichi the Heat will surely keep; and Josh McRoberts’ $6.0 million player option, which he can choose to exercise), at a total cost of $82.8 million. That leaves the Heat with up to $17 million of cap space(2).

If Waiters exercises his $3.0 million player option, team salary increases to $85.8 million which, in turn, leaves the Heat with nine players and up to $15 million of room(2).

$15 million will not be nearly enough to attract Westbrook or Hayward — with maximum salaries for both currently projected at $28.8 million – but it’s not as far away as you may think.

A trade of Dragic next summer – in whom at least a third of the NBA was interested this summer (according to reports, I believe by Ethan Skolnick of the Miami Herald) – would increase the Heat’s total cap room to $31 million. Trading both Dragic and McRoberts would increase the total to $36 million.

That’s more than enough for a player such as Westbrook or Hayward, with plenty to spare.

In that way, Waiters represents a low-risk, high-reward gamble for the Heat.

The question now is: How does he best fit into the rotation?

Miami now finds itself overloaded with shooting guards on the roster — including Waiters, Richardson, Tyler Johnson, Wayne Ellington and Rodney McGruder – but, as yet, no clear starter.

The Heat doled out a two-year, $12.3 million contract to Ellington to provide veteran floor-spacing. He’s a shooting-specialist (37.6 percent on three-pointers for his career) who doesn’t necessarily shoot as well on the catch-and-shoot as Johnson or Richardson, and doesn’t do much else. But he is more of a gunslinger than either of the other two, and, unlike the other two, doesn’t need his feet set to get his shot off with accuracy. That ability alone can create space for others. But he’s also about to 29 years old, and not a core piece of the team’s future. That, in turn, makes him not a viable candidate to start.

Waiters, alternatively, is still just 24 years old, and will be evaluated throughout the season as a possible longer-term fit. But if he is to start, it would create added problems and throw into question some of the other moves the Heat made this summer.

Earlier in the summer, the Heat elected to match the four-year, $50 million offer sheet the Nets extended to Tyler Johnson. It wasn’t necessarily a decision with which Riley agreed, but it’s done. Johnson will earn $5.6 million this season and $5.9 million next season, before his payouts vault to $19.2 million in each of the last two seasons. Johnson has the potential to be a great player — potentially a bargain, even at his final two season payouts — and an ideal complement to Dragic in the Heat backcourt. He’s short (6-foot-3) and slight (190 pounds), but he makes up for it with serious hops and sweet shooting. He’ll throw down a highlight-reel dunk just as easily as he’ll swish a three-pointer when his feet are set, which can create serious space for Dragic in an offense designed to capitalize upon it. But he’ll also do the little things you may not notice — like play the game with a tremendous energy, or grab a rebound typically reserved for a player twice his size, or maintain the versatility to guard the quicker point guards against whom Dragic could struggle. But, with such large salaries in the final two seasons of his deal, Johnson would be way overpriced as a backup, and nearly impossible to trade if it ever came to that. He can’t be traded without his consent for a full year, and his contract contains a 15 percent trade bonus in the event he is traded.

The worry with Waiters as the Heat’s starting shooting guard, then, is that it effectively relegates Johnson to a backup role. Worse still, with the Heat lacking a single backup point guard on the entire roster, it would likely require Johnson to see increase minutes in the role.

The problem with that?

First, Johnson is NOT a point guard. He can’t effectively do it, and it destroys his growth potential at his more natural shooting guard offensive position.

Second, in order to convince an elite player such as Russell Westbrook – a primary target, to be sure – to sign with the Heat next summer, Miami needs to prove that Johnson can be a quality (or even special) starter at his natural position, not as a reserve point guard.

Johnson certainly has that potential. He has the potential to be special. But if Waiters is to become a starter for the Heat this season, it effectively stunts Johnson’s growth. And if Waiters is to become a long-term starting option for the Heat, matching Johnson’s contract could effectively be considered an unwise decision with cap-crippling effects in future seasons.

Waiters’ best role for the Heat, therefore, figures to be as a reserve. He seemingly represents an imperfect backcourt complement to starting point guard Goran Dragic and center Hassan Whiteside, both of whom perform best when paired with a floor-spacing guard who provides them with maximum room into which to maneuver, a skill-set more readily possessed by Johnson and Richardson. A reserve role would not only allow Johnson and Richardson, established long-term pieces, more of an opportunity develop, but also allow Waiters to do that which he loves most – dominate the ball as an instant-offense contributor largely against an opponent’s second unit, effectively as the Heat’s backup point guard, a role the current Heat team desperately needs.

While Waiters’ signing is therefore a strong move for the Heat given the price, it does lead to difficult decisions for the Heat given its roster construction.

The Heat now finds itself with five shooting guards — three of whom are long-term pieces which need significant playing time to develop (Johnson, Richardson and McGruder), and the other two fighting for the same opportunity (Waiters and Ellington). All five possess strong defensive instincts, unique positional versatility, and differentiated offensive skill-sets. Johnson is the highly accurate 3-point shooter when his feet are set, attack the rim when the opportunity presents itself, and guard point guards on defensive (but will struggle when ask to play the role on offense). Richardson is the highly accurate 3-point shooter when his feet are set who, despite being less polished than Johnson, has the versatility to both play and guard point guard, shooting guard and small forward. Ellington is the 3-point shooter who doesn’t necessarily need his feet set to maintain accuracy at his primary skill, which can create serious problems for defenses when he’s hot. Waiters is the play-maker of the group, who can initiate offense for himself and the team in a way the Heat desperately needs, but often at the expense of efficiency; and his strength, despite his diminutive size, provides him the versatility to defend certain small forwards.  McGruder is the mystery of the group; it’s not clear what he provides.

How will head coach Erik Spoelstra manage it all in a way that allows Waiters the opportunity to be evaluated for a long-term role… while allowing for the continued development of Richardson,  making the acquisitions of Ellington and McGruder worthwhile, and, most importantly, allowing Johnson every opportunity to become the long-term starting shooting guard that his largely immovable contract demands he must be given the opportunity to become (without stunting his growth by forcing him to initiate offense as a point guard)?

In an ideal-case scenario, Johnson and Richardson would get maximized floor time as definitive building blocks for the future, with Waiters, Ellington and McGruder challenging for playing time off the bench.

Accommodating all five could impact incumbent starter Justise Winslow. In his first two seasons, Winslow has shown promise as a defender. But his offense at times has proven to be so limited that defenders constantly sagged away from him, often effectively relegating the Heat to playing four-on-five basketball. Winslow’s shooting digressed dramatically in his second season — converting on just 35.6% of his shots from the floor, including just 20.0% from the 3-point line. If he improves his shooting, he could quickly become a star-level starter. If he doesn’t, his role as starter could quickly be jeopardized.

Could it be that the Heat will utilize Waiters effectively as a backup point guard (for a team with ample opportunities to sign one this summer but didn’t)? Could doing so free up Johnson to develop as a starting shooting guard (a position at which he is far more likely to excel than at point guard)? Could Richardson challenge for increasing time at small forward if Winslow’s offensive struggles continue? Could this free up time for Ellington as a backup shooting guard?

Could these three-guard type of rotations help the Heat to do the one thing that is critical to achieve offensive success around the penetration of Dragic and interior dominance of Whiteside – space the floor with superior three-point shooting?

Only time will tell.

Notes:

(1) It also caused a third, perhaps less serious problem for Riley. It meant that the Heat would need to squander $4.4 million of cap space. The reason? When Tyler Johnson — Miami’s own restricted free agent, who was on the books at just the cost of his $1.2 million cap hold to start the summer — signed his four-year, $50 million offer sheet with the Brooklyn Nets on July 7th, the Heat were given three days to match. Once a team officially matches an offer sheet, the player’s cap hold is replaced on his team’s books with his actual first-year salary (in Johnson’s case, $5.6 million). The Heat could therefore maximize its cap space by filling out its roster before matching Johnson’s offer sheet. The Heat ultimately did just that. Had it instead signed Waiters to an offer sheet, the Thunder would have been given three days to match. During those three days, Johnson’s cap hit on the Heat’s books would’ve increased to $5.6 million, effectively costing the Heat $4.4 million of cap space.

(2) The Heat’s 2017 first-round draft pick would reduce this figure.

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