Heat Continue to Prove Its Scouting and Development Prowess

Updated (02/06/20): This post has been updated to reflect the Heat’s agreement to trade Justise Winslow, James Johnson and Dion Waiters to the Memphis Grizzlies in exchange for Jae Crowder, Solomon Hill and Andre Iguodala (who, in conjunction with the trade, will sign a two-year, $30M extension that includes a player option prior to the summer of 2021).  

The Miami Heat started the summer way over the luxury tax line, lacking in high-end talent, and seemingly unable to do much to improve but hope to attract a star in 2021.

But a brilliantly masterminded sign-and-trade for Jimmy Butler, and a phenomenal string of success in identifying and developing younger and underappreciated talent have transformed the Heat’s prospects for the future.

Over the past four-plus years, the Heat has drafted Tyler Herro and Bam Adebayo in the middle of the first round; drafted KZ Okpala in the second round; signed Kendrick Nunn, Chris Silva, Duncan Robinson and Derrick Jones Jr. as undrafted free agents; and traded for Meyers Leonard. Most have developed beyond expectations. As a result, this Heat team is quite suddenly really good, and building a core that can actually attract a star.

Better yet, the Heat have put themselves in ideal position to retain just about all of them, still have enough flexibility to add a star, and actually make the prospect credible.

Here’s a look at the contract situations of each of the Heat’s young core:

Bam Adebayo is a budding star who was drafted out of Kentucky by the Heat with the No. 14 pick in the 2017 draft.

He signed a four-year, $14.0M rookie-scale contract that pays out $3.5M this season and $5.1M in 2020-21. The Heat will retain his full free agent Bird rights in the summer of 2021, at the cost of a $15.3M cap hold. The Heat can make him a restricted free agent, by extending a qualifying offer of either $7.1M or, if he meets starter criteria, $7.7M.

Adebayo will become eligible to sign a rookie-scale extension at any point between July 1, 2020 and the start of the 2020-21 NBA season. The extension could potentially start at any amount up to the 25% max (or 30% max, if he meets the “5th Year 30% Max Criteria”) and cover up to five years (if he is offered a “Designated Rookie Scale Extension”). Doing so, however, would come at a cost, since his first-year salary will surely be greater than what would otherwise be his $15.3M cap hold, which would reduce the Heat’s potential cap room as it plans to make a big slash in free agency that summer (2021).

Summer of 2021 Impact: Expect the Heat to bypass an extension next summer, and instead re-sign him as a restricted free agent in the summer of 2021, using $15.3 million of the Heat’s valuable cap room (despite a first-year salary that could potentially reach all the way to the max). 

***

Tyler Herro, whose dominance in the preseason has people looking to him as a potential rookie of the year candidate, was drafted out of Kentucky by the Heat with the No. 13 pick in the 2019 draft.

He signed a four-year, $17.2M rookie-scale contract that pays out $3.6M this season, $3.8M in 2020-21, $4.0M (team option) in 2021-22 and $5.7M (team option) in 2022-23. The Heat will retain his full free agent Bird rights in the summer of 2023, at the cost of an $18.8M cap hold. The Heat can make him a restricted free agent, by extending a qualifying offer of either $7.9M or, if he meets starter criteria, $8.5M.

Herro will become eligible to sign a rookie-scale extension at any point between July 1, 2022 and the start of the 2022-23 NBA regular season. The extension could potentially start at any amount up to the 25% max (or 30% max, if he meets the “5th Year 30% Max Criteria”) and cover anywhere up to five years (if he is offered a “Designated Rookie Scale Extension”).

Summer of 2021 Impact: Expect the Heat to exercise its $4.0M team option.  

***

Derrick Jones Jr. is among the most athletic players in the whole of the NBA. He initially went undrafted out of UNLV in 2016. He was then signed by the Phoenix Suns in September 2016, but was waived in December 2017. Later that month, the Heat signed him to a two-way contract. In July 2018, the Heat signed him to a two-year, $3.2M minimum-salary contract.

Jones is earning $1.6M this season, in the second year of that contract, after which he will become an unrestricted free agent this summer. The Heat will have his full Bird rights, at the cost of a $1.7M minimum-salary cap hold.

He is ineligible to sign an extension before hitting free agency next summer.

Summer of 2021 Impact: His is the most unclear situation of all Heat youngsters. The Heat will likely look to re-sign him next summer, but they’ll be prudently cautious in their approach. If the sides can agree on a one-year contract, it’ll maintain maximum flexibility for the summer of 2021; Miami has the flexibility to overpay for that one season (e.g., pay him in one season what he might otherwise earn in two) to make it so. If he commands a multi-year contract, Miaim will have a decision to make — subtract from 2021 cap room, or let him go. 

***

Kendrick Nunn, college basketball’s No. 2 scorer behind Trae Young in 2017-18, was initially signed to an Exhibit 10 contract by Golden State Warriors as an undrafted free agent in the summer of 2018. They cut him during training camp, and directed him toward their G-League affiliate. He remained an unrestricted free agent for the entire 2018-19 season, until the Heat signed him to a three-year, $3.1M minimum-salary contract on the very last day of the season.

He made just $4,737 for his one day under contract last season, but that day gave him a full year of NBA service – which, for him, means big money. Had he instead signed with Miami this summer, his minimum salaries for this and next season would’ve paid $664K less ($2.4M total), and he’d be an Arenas restricted free agent in the summer of 2021. (The extra year of service will continue to serve him well throughout the rest of his NBA career.)

Instead, Nunn is now set to earn $1.4M ($300K guaranteed) this season and another $1.7M (non-guaranteed) in 2020-21. The Heat will then have his full Bird rights in the summer of 2021, and can make him a restricted free agent by issuing a qualifying offer (and incurring a cap hold) of either $2.1M or, if he meets starter criteria, $4.7M.

Nunn would qualify to sign an extension on April 10, 2021, which is just a few months before what would otherwise be his restricted free agency in July. The extension could start at up to 120% of next season’s estimated average salary, currently projected at $12.1M, which would translate to as much as $54M over as many as four years. Doing so, however, would come at a cost if his first-year salary is greater than what would otherwise be his up to $4.7M cap hit (which could be lowered to $1.9M if an agreement is reached by July 13, which would enable Miami to rescind its qualifying offer without sacrificing his Bird rights), reducing the Heat’s potential cap room as it plans to make a big slash in free agency that summer (2021).

Summer of 2021 Impact: Expect the Heat to bypass an extension, and instead potentially re-sign him as free agent in the summer of 2021, using as little as $1.9M of the Heat’s valuable cap room (despite a first-year salary that could potentially reach all the way to the max).

***

KZ Okpala was drafted out of Stanford by the Indiana Pacers on behalf of the Heat with the No. 32 pick in the 2019 draft, who then traded him to Miami in exchange for three future second-round picks – in 2022, 2025 and 2026.

The Heat had previously acquired the No. 44 pick from the Hawks in exchange for $1.88M in cash and their conditional 2024 second-round pick (which Miami keeps if it’s 31-50, sends to Atlanta if it’s 51-55, and sends to Cleveland if it’s 56-60). As a result of the Okpala trade, Miami no longer needed the No. 44 pick, and therefore traded it to the Denver Nuggets (who used it to draft Bol Bol) in exchange for $1.2M in cash and a low 2022 second-round pick (the less favorable of Denver and Philadelphia).

The draft day trading essentially left the Heat with Okpala, rather than the pick that ultimately became Bol Bol (though it’s unlikely the Heat knew that at the time it was traded) AND two extra future second-round picks. The Heat have now traded their second-round picks in 2020, 2021, 2022, 2023, 2025 and 2026. They have just two remaining (for use or trade) over the next seven years – in 2022 (the less favorable of Denver and Philadelphia) and 2024 (but only if it’s 31-50). That heavy cost (and the fact that Bol Bol ultimately signed a highly team-friendly two-year, two-way contract) could serve as a measuring stick for Heat fans as Okpala progresses over time.

Okpala was signed to a three-year, $4.2M fully guaranteed minimum-salary contract that will pay out $898K this season, $1.5M in 2020-21, and $1.8M in 2021-22. The Heat will then have his full Bird rights in the summer of 2022, and can make him a restricted free agent by issuing a qualifying offer (and incurring a cap hold) of either $2.2M or, if he meets starter criteria, $4.9M.

He could potentially qualify for an extension as soon as July 7, 2021, which would start with the 2022-23 NBA season. The extension could start at up to 120% of the 2021-22 estimated average salary, currently projected at $12.5M, which would translate to as much as $56M over as many as four years.

Summer of 2021 Impact: He will be under contract for $1.8M. 

***

Duncan Robinson is, according to head coach Erik Spoelstra, “one of the best shooters on the planet,” and he very well could be. The Heat initially signed him to a two-way contract as an undrafted free agent from the Michigan Wolverines in the summer of 2018, before coming to agreement to replace it with a three-year, $3.1M minimum-salary contract on the second to last day of the season.

Robinson is set to earn $1.4M ($1.0M guaranteed) this season and another $1.7M (non-guaranteed) in 2020-21. The Heat will then have his full Bird rights in the summer of 2021, and can make him a restricted free agent by issuing a qualifying offer (and incurring a cap hold) of either $2.1M or, if he meets starter criteria, $4.7M.

Duncan would qualify to sign an extension on April 9, 2021, which is just a few months before what would otherwise be his restricted free agency in July. The extension could start at up to 120% of next season’s estimated average salary, currently projected at $12.1M, and pay as much as $54M over as many as four years. Doing so, however, would come at a cost if his first-year salary is greater than what would otherwise be his up to $4.7M cap hit (which could be lowered to $1.9M if an agreement is reached by July 13, which would enable Miami to rescind its qualifying offer without sacrificing his Bird rights), reducing the Heat’s potential cap room as it plans to make a big slash in free agency that summer (2021).

Summer of 2021 Impact: Expect the Heat to bypass an extension, and instead potentially re-sign him as free agent in the summer of 2021, using as little as $1.9M of the Heat’s valuable cap room (despite a first-year salary that could potentially reach all the way to the max).

***

Chris Silva is the Heat’s latest development project. The Heat initially signed him to a two-way contract as an undrafted free agent from the University of South Carolina this summer, before coming to agreement to replace it with a three-year, $3.8M minimum-salary contract in January 2020.

Silva is set to earn $467K (which, when added the salary he collected on his two-way contract, totals to about $745K) this season and another $1.5M (guaranteed) in 2020-21. Thereafter, the Heat will have a $1.8M team option in the summer of 2020-21. If Miami declines the option, they can make him an Arenas restricted free agent in the summer of 2021, by extending a $2.1M qualifying offer (or $4.7M if he meets the starter criteria), and they’ll be guaranteed the right to match any outside offers with his Early-Bird rights (this scenario is technically possible, but won’t happen; if they decline the option, it will be because he didn’t perform well, at which point they’d have no intention of making him a restricted free agent). If Miami exercises the option, they can make him a restricted free agent in the summer of 2022, by extending a $2.M qualifying offer (or $4.9M if he meets the starter criteria); and they’ll be guaranteed the right to match any outside offers with his full Bird rights.

Silva would only qualify to sign an extension on January 15, 2022, but only if his option is exercised. The extension could start at up to 120% of that season’s estimated average salary, currently projected at $12.5M, and pay as much as $56M over as many as four years.

Summer of 2021 Impact: The beauty of the contract lies in the flexibility it provides. If he performs well, the Heat can exercise the option and have him under contract at just $1.8M. If he doesn’t perform well, the Heat can decline the option, let him walk, and replace his would-be $1.8M salary with a $1.0M roster charge, a $750K cap savings.  

***

The Heat are in a strong position to retain most or all of their young talent, and still have enough cap room left over to make a run at a star free agent in the summer of 2021.

That summer could be historically loaded with unrestricted free agents potentially attractive to the Heat, including: Kawhi Leonard, LeBron James, Giannis Antetokounmpo, Anthony Davis, Paul George, Gordon Hayward, Otto Porter, and Julius Randle, among many others. Considering fit, age and current team status, Giannis would appear to be a particularly attractive target.

The salary cap is projected to reach $125M that summer.

Projected max salaries at that cap level would range from $31.3M for players with 0-6 years of service, $37.5M for players with 7-9 years of service (e.g., Giannis, Davis), and $43.8M for players with 10+ years of service (e.g., Kawhi, LeBron).

Here’s where the Heat’s team salary currently standards:

  • Guaranteed Salary: Jimmy Butler ($36.0M), KZ Okpala ($1.8M), dead-money cap charge ($5.2M)
  • Team Options: Andre Iguodala ($15.0M), Tyler Herro ($4.0M), Chris Silva ($1.8M)
  • Cap Holds: Bam Adebayo ($15.3M), Kendrick Nunn ($1.9M – $4.7M), Duncan Robinson ($1.9M – $4.7M)
  • Others: 2020 first-round pick (TBD: ~$2.5M)
  • Uncertain: Goran Dragic, Derrick Jones Jr., Jae Crowder, Udonis Haslem, Kelly Olynyk, Meyers Leonard

Factoring in everyone above but those in the uncertain category, the Heat could generate up to about $36M of cap room (with the likely ability to reach the $37.5M max). Bypassing Iguodala’s team option jumps it to $50M-plus.(1)

And, after all cap room is used up, the Heat would still have the $5.5M Room Mid-Level Exception.

Could the Heat add a star in 2021, to this suddenly already strong core?

Notes:

(1) This is where that $5.2M dead-money cap charge really hurts.

2 Responses

  1. Manny says:

    Great work as usual, Albert. Thank you.

Leave a Reply

Your email address will not be published. Required fields are marked *