The Sign-and-Trade Approach

May 9th, 2010 No comments

You may not realize that the Miami Heat will start the offseason with a team salary in excess of the new salary cap threshold. This is caused by intangible charges, called “cap holds,” created by the Heat’s own free agents.

The Heat can very easily get rid of these cap holds in order to create the huge cap space we’ve all been reading about, but does it want to?

While teams with cap space can only spend up to the amount of the salary cap, teams that are over the cap are virtually unlimited in what they can spend through trade.

But the Heat only has two players, Michael Beasley and Daequan Cook, under contract. It doesn’t really have anybody to trade.

Enter the concept of the sign-and-trade.

You may have heard local beat writers discussing the possibility of sign-and-trade agreements as a means for the Heat to increase the total amount of dollars it can spend. They’re right. And they’re wrong. Let me explain. Read more…

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Restricted Tag To Narrow Riley’s Focus

May 8th, 2010 No comments

Rudy Gay is this offseason's best, and most expensive, free agent small forward money can buy. But he's restricted.

Rudy Gay.

By all accounts, he’s far and away the best true small forward available in free agency. He will command a starting salary of $10 million or more.

It may surprise you (but if you read my CapRoom tab it shouldn’t) to know the Heat can actually sign a max contract power forward and still have the leftover shekels to give it to him. Awesome, right?

But he’s restricted.

That means the Grizzlies would have seven days to match any potential Heat offer and steal him away.

Whatever proposal the Miami makes Memphis has the right to match. Don’t believe they will? Don’t believe they can afford it?

Who cares! That’s not the point! The point is that those $10 million are now tied up and unavailable for seven whole days. An offer to a restricted free agent cannot be rescinded. So Pat Riley will need to sit on his hands for an entire week while the Grizzlies decide on the fate of Rudy Gay… and the Miami Heat.

Pat can’t go shopping for alternatives just in case. Which top tier free agent is going to be willing to sit idly by and wait for the Heat to discover whether it can – or cannot – even make him an offer? Free agency spans a long, long time – many months in fact from its start on July 8 to the start to the regular season in late October. But it could be over in less time than it takes for you to utter the words, what the heck just happened. The best free agents could be gone in days… minutes…

If you were Pat Riley, would you be willing to gamble your organization’s entire future by making an offer to a restricted free agent, giving his existing team the unbridled incentive to shop around for alternatives for the better part of a week? Read more…

A Stroll Down Memory Lane

May 3rd, 2010 1 comment

What might have been if Riley's acquisition of Juwan Howard was not voided by the league?

Do you remember the last time the Heat had substantial cap space?

It was the summer of 1996.

Owner Micky Arison had hired basketball’s most celebrated coach the year prior with one goal in mind: to build a  championship-caliber roster. This was Pat Riley’s chance.

Without hesitation, Riley traded away Glen Rice, Khalid Reeves, Matt Geiger, Kevin Willis, Bimbo Coles, Billy Owens and Kevin Gamble in moves designed to create more salary cap room for the summer’s free-agent shopping spree, giving him maximum maneuverability in what was considered at the time to be the NBA’s biggest free-agent market ever.

The Heat began the offseason with just $3.8 million in salary commitments to three players (Sasha Danilovic, Kurt Thomas and Keith Askins), leaving $20.6 million of available room below the $24.4 million salary cap.

Free agent guard Tim Hardaway and center Alonzo Mourning were the cornerstones of the team’s vision. The rest was to be filled on the open market.

One minute after the new labor agreement was finalized at 4:59 p.m. on July 11, the NBA’s free agent marketplace officially opened.

Riley kicked off the summer by turning his sights to budding young superstar Juwan Howard, in what was soon to become one of the most heated and controversial battles in league history.

Boosted by gaudy per game averages of 22.1 points, 8.1 rebounds and 4.4 assists, Howard had opted-out of his existing contract with the Washington Bullets in favor of the big payday. Pairing Mourning with the 23-year-old first-time All-Star forward was expected to instantaneously boost Miami into the league’s upper echelon.

The Bullets opened up the bidding with an initial seven-year, $78.4 million offer. Although publicly stating his desire to stay with the Bullets, Howard was not impressed. Howard felt that his market value was far greater than that.

The Heat countered at seven years and $91.0 million, plus $3.5 million in bonuses. The Bullets then pushed their offer to an $84.0 million take-it-or-leave-it ultimatum that left Howard in tears about the prospect of leaving Washington. The Heat upped the ante to seven years and $95.2 million offer, plus an additional $5.6 million in bonuses and perks that included luxury hotel suites and limousine service during road trips. It was all but inevitable.

At around 1 a.m. on July 13, Riley’s phone rang. Howard was on the other end. “Coach,” he told Riley. “I’m coming to Miami.”

When the moratorium ended on July 17, the Heat officially signed Howard to a seven-year, $100.8 million contract, making him the NBA’s first ever nine-figure player. Howard was slated to earn more than the likes of Hakeem Olajuwon and David Robinson.

Riley made another big splash the next day, signing forward P.J. Brown to an incentive-laden seven-year deal with a $19.0 million base, but worth as much as $35.8 million based upon the achievement of certain individual and team milestones.

He then turned his sights back inward.

On July 23, Hardaway was re-signed to a four-year, $10.4 million deal, but worth as much as $20.8 million.

The final move in the master plan was to sign Mourning to a seven-year, $105 million contract, utilizing his Bird rights to legally exceed the salary cap by $1.5 million. This opportunity was made possible because Mourning’s $6.8 million cap hold was $2.5 million less than his $9.4 million first-year salary to be.

However, on July 31, with Howard parading around Miami as a member of the Heat, the NBA shockingly voided his contract. Read more…

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The Heat’s Playoff Wishes

May 2nd, 2010 No comments

Now that the Heat has been eliminated from contention, it is a bittersweet feeling to continue watching the playoffs. But there is still plenty to root for.

Next season’s salary cap is based on revenues generated by the league this season. That includes playoff ticket sales, concessions and parking. The longer each playoff series goes, the higher the upcoming cap will be. While the Heat didn’t do anything to help itself – bowing out in just five games – playoff attendance is actually up year-over-year. That could be a good sign.

Last month, Commissioner David Stern said the league is projecting the salary cap to come in around $56.1 million, good news for a Heat team looking to sign top stars during this summer’s expected free agency bonanza. While that figure would still be lower than this season’s $57.7 million cap and only the third time it’s ever fallen, it’s far better than estimates from last summer, when the league sent a memo to teams warning them of a potential sharp drop to between $50.4 million to $53.6 million.

But if the playoffs prove to be more profitable than projected in April, it would certainly be possible for the cap to rise even further. That’s quite meaningful for the Heat. Every dollar rise in the cap is another dollar that can be given to that potential third elite player, after offering max contracts to both Wade and a sidekick.

There are also subplots that should be considered. Each of the Heat’s potential primary targets, with the exception of Chris Bosh, has led his team into the second round of the playoffs. Any such successes can only provide more impetus for teams to offer up more money to retain their stars, and provide more incentive for these players to consider the status quo.

The message is this. Root for the Celtics, Magic, Lakers and Spurs to win their second round match-ups… in seven games.

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Dirk Nowitzki on the Heat’s Radar?

May 1st, 2010 No comments

Now that Heat fans have discovered that Dirk Nowitzki has an early termination option in his contract that could make him a free agent this offseason, many are asking about a potential tandem with Dwyane Wade in South Florida.

It had been widely assumed throughout the season that Nowitzki will remain with the Mavericks. Dirk even indicated as much prior to the playoffs. But Dallas’ first round ousting, its third such exit in the past four years, left him shocked, his comments unconvincing and people wondering.

I nevertheless continue to believe Nowitzki won’t leave the Mavericks.

Dirk wants to win a championship. That would be the impetus for any potential jump, because otherwise life is exceedingly good in Dallas – the facilities, the staff, and the treatment of players are all first class.

There is simply no compelling alternative in the west. Oklahoma City, which has the most free cap space of all potential western conference contenders, is the only even remotely viable scenario. Dirk would seem to be a perfect fit, and perhaps the missing link to a legitimate title run. The two stadiums are also just 200 miles apart. But the $16.5 million the Thunder could offer is more than $5 million less than he is set to make by remaining in Dallas.

All potential scenarios in the east involve rebuilding projects with questionable pasts and unproven futures. There’s simply too much uncertainty for him to take such a huge risk.

Remaining in Dallas seems logical. Owner Mark Cuban is eager to extend Dirk’s contract, which would have him making $21.5 million next season. And the Mavericks, despite its recent early round playoff exits, continue to be a significant title threat.

Cuban is committed to that end like no other owner in the league.

He spends whatever it takes. His is the only team in the N.B.A. that has both exceeded the tax threshold in every season since 2005/06 — before which there was no tax — and has guaranteed contracts for next season which exceed next season’s projected threshold.

He does whatever it takes. He is reportedly preparing to make a pitch to pair Dirk with prized free agent LeBron James, though I don’t see how in the world such an acquisition would ever come to pass.

Dirk isn’t leaving Dallas.

As far as the Heat is concerned, it’s not such a big loss. Dirk is an elite player. But he also turns 32 next month, commands a salary far too high for the team’s liking (Wade, by comparison, is set to make $5 million less), and he’s not the tough, banger-type that could shift over to the center position in a pinch.

Dirk in Miami? It’s a nice thought, but it’s not going to happen.

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Let the games begin…

April 27th, 2010 No comments

Now that the Miami Heat is eliminated from the playoffs, the 2010/11 rebuilding plan is officially underway.

The Heat is now allowed to pursue trades with other teams not currently in the playoffs. Off limits are any players who will become free agents or who have team or player options. That means no Bosh discussions just yet. But it does mean the Heat can start to desperately pursue suitors to take over the contracts of James Jones and Daequan Cook, and perhaps Michael Beasley.

The only team which can create cap space for trades is Oklahoma City. The Thunder could create as much as $2.4 million of cap space before the current season officially ends on June 30. Therefore, if the Heat aims to send out contracts without taking on contracts in return, it will need to pursue a trade with the Thunder, pursue a trade with a team with a large enough trade exception to take on the salary the Heat would be shedding, or agree to a trade that will technically be completed during the next salary cap year in July.

The next big dates to keep in mind:

June 24: 2010 N.B.A. draft
June 25: Last day for Joel Anthony to exercise his player option
June 30: Last day for the Heat to exercise its team option on Mario Chalmers
June 30: Last day for the Heat to waive James Jones, or his contract becomes guaranteed
June 30: Official end of the 2009-10 regular season
July 1: Free agency begins for all teams
July 8: Free agent contracts can be signed

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Asssessing Jermaine O’Neal’s Worth on the Open Market

April 23rd, 2010 No comments

Here’s a question for you. How many million dollars is Jermaine O’Neal costing himself with his postseason performance?

I’ll take a stab. I’ll boldly claim it to be over 8 figures. Yes, $10 million.

There were some predicting O’Neal, with his strong and unexpected regular season performance, could garner a multi-season contract with a starting salary of approximately $10 million. Seeing him play on a day-to-day basis, I always felt that was crazy. But he did shoot a career best 53% from the floor, and remains a significant interior shot blocking presence.

But the real Jermaine O’Neal has finally stood up. O’Neal’s playoff stat line is nothing short of ridiculous. In games 1, 2 and 3 he shot 3-14, 1-10 and 1-7 from the floor, respectively. That’s a mind-boggling 16%. Yes, he was matched up against perhaps the Eastern Conference’s second best low post defender. But 16%? His shooting has been awful. His rebounding not much better. And the sad truth is that he is an overrated defender. In my humble opinion, I see Jermaine as a strong shot-blocking help defender. But in one-on-one defense, he lacks the strength or desire to keep his man in front of him. He plainly gets dominated.

In the offseason, Jermaine will be looking for a championship contender, some place where he can sign a multi-year deal where he can finish out his career.

“I’m looking forward to it because basically it’s the stretch run for me,” O’Neal was quoted as saying a few weeks back. “I don’t plan on playing past the next four or five years. I definitely want to make a decision and put myself in the best position to compete for a championship.”

Now hitting the ripe age of 31 years old, O’Neal will get his first chance at becoming a free agent during his career. Can you see anyone handing him a four year contract?

There are data points working in his favor. Marcus Camby just got upwards of $21 million (with $5 more in incentives) from Portland at 35 years of age. And there are several N.B.A. clubs that can use an imposing (is that what he is?) big man with touch around the basket. I could see one stretching. But here’s how his last three performances have hurt him:

  • I never saw any team willing to offer him his desired four to five year contract. Three, however, was a possibility. That’s now two.
  • I never quite saw $10 million per season in his future, but I could have seen someone stretch to between $7 million and $8 million guaranteed. Now you can knock that down to the Mid-Level Exception (MLE).

I am currently projecting an MLE of approximately $5.8 million. That’s two years and $12 million. Or roughly $10 million less than three years and $21 – $24 million. Sounds about right to me.

Though not for the Heat. It’s too big a risk for Miami at those levels.

If O’Neal truly wants to win a championship, I would bring him back at no more than half that amount, as the starting center on a team that features Dwyane Wade, LeBron James and Chris Bosh. Of course, based on current cap projections, that’d require big sacrifices from the latter three players. And he wouldn’t accept anyway.

Sacrificing O’Neal will be tough, if only because there simply aren’t any better options on the free agent market, certainly not at bargain prices. Which makes you think creatively. The Heat still owns his Bird rights. They could theoretically sign him to a one-year minimum salary contract, conserving cap space for this summer in the process, and then give him a huge boost in salary the following season to make up for it.

Great in theory, but not in practice. Negotiating two future contracts is a direct violation of league rules. It is considered by the league to be among the most serious violations a team can commit. It is punished severely when discovered. O’Neal would have to sign the first without any knowledge of the second. What he knew, and when, is hard to prove. But the contract values would speak for themselves.

O’Neal won’t be back next season.

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Beasley Trade Expectiations

April 21st, 2010 No comments

Let’s discuss Michael Beasley for a moment.

For whatever reason, he’s not living up to expectations.

The sad truth is that he was an unwise draft selection for the Miami Heat.

It’s a shame when you consider that beneath his personal and professional struggles is a truly nice guy.

It’s a shame when you consider how much talent was available to the Heat at positions of greater need – from point guard Russell Westbrook, to power forward Kevin Love, to center Brook Lopez to name a few.

Some of us blame Pat Riley for drafting him, some of us blame Erik Spoelstra for the way in which he has been handled. Some of us blame Dywane Wade for his lack of mentorship. Others of us put the blame squarely on Michael’s shoulders.

At this point, it doesn’t matter who’s at fault. The only thing that matters is putting championship-caliber pieces around Dwyane Wade in the offseason.

Michael Beasley should not be one of those pieces. At this point, a separation is as good for Michael as it is for Miami. And it’s coming. It’s inevitable. As soon as the Heat successfully signs Bosh or Stoudemire or Boozer, Michael becomes expendable and clearing his salary more valuable. So the question is not what the Heat should do with him but rather what it can expect in return for him.

Expecting much of value in return for Beasley will not be easy.

Consider the perception of him from those outside of South Florida. Off the court, he has had a worrisome and checkered past. On the court, he appears very unpolished and, even worse, all-too-often completely lost. Nobody’s quite sure if he’s a small forward or power forward. His physical attributes – height, weight, shoulder width, etc. – suggest he’s the former but he seems to perform better as the latter. He can’t defend either position.

All indications thus far seem to suggest interest in the troubled forward from around the league is waning. The Heat were interested in Amare Stoudemire at the trade deadline but never offered Beasley up in return, instead communicating a commitment to build around him as a cornerstone.

Since that time, Beasley’s game has deteriorated. He’s averaging a mere 13.1 points, on 42.0% shooting, and 5.6 rebounds per game. In the playoffs, his production has been worse. Last night was telling. He was playing in front of a national audience. The entire country was watching. He was matched up against the undersized and not so fleet-of-foot Celtics backup power forward Glenn Davis, a great match-up for the swift and agile Beasley in his bid for redemption. And he stunk.

People have thrown around Beasley trade proposals involving anyone from Darren Collison to Tyreke Evans to Stephen Curry (my favorite N.B.A. point guard, a must-acquire for the Heat if at all possible, no matter what it costs, short of Wade, though it’s not possible, and I’m just dreaming) to Chris Bosh. Such proposals would seem ludicrous at this point. I would suggest that we all temper our expectations just a bit. Right now, the bigger worry is about Miami’s ability to move him – and his $5 million expiring contract – at all.

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UPDATED: Heat’s True Cap Position

April 18th, 2010 No comments

Will the Heat have enough dollars to build a contender?

Commissioner David Stern changed the landscape of the free agent market on Friday. During the N.B.A. board of governors session in New York, he revealed that the league’s projection for the 2010/11 salary cap is now $56.1 million — a substantial increase from its earlier projections of as low as $50.4 million.

This is a wonderful development for a Heat team looking to retool. Let’s take a look at exactly what it means.

Salary Commitments. The Heat have the following players under contract next season:

Michael Beasley: $4,962,640

Daequan Cook: $2,169,857

James Jones (Partial Guarantee): $1,856,000

Joel Anthony: $885,120

Mario Chalmers ($854,389 Team Option): $0

Total Salary Commitments: $9,873,217 

N.B.A. Draft. The Heat hold the 18th pick in the first round of the 2010 N.B.A. Draft, to be held on June 24th.

First round draft picks, unlike all other N.B.A. players, have a defined salary scale for which they must be paid. It’s a sliding scale based on the position within the draft the player is selected. Such players count against the cap at their scale amount immediately upon being drafted. They can ultimately be signed for between 80% and 120% of their scale amount. In reality, however, they nearly always make 120%.

At No. 18, the player who the Heat selects in the draft will count $1,237,500 against the cap. If they prefer, the Heat can choose to trade the pick, possibly for a future pick, in order to clear the cap space. If they keep it, once the player is ultimately signed, he will likely earn a 20% increase to his scale amount, or $1,485,000. The Heat can keep him at the smaller number, utilize all of its cap space, and then exceed the cap to give him the larger number. Should they keep the pick, that’s precisely what they’ll do.  Read more…

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N.B.A. Raises 2010-11 Salary Cap Projection to $56.1 Million

April 16th, 2010 No comments

David Stern dramatically altered the landscape of the summer’s free-agent market on Friday. At the league’s board of governors meeting in New York, he revealed that his latest projection for the 2010-11 salary cap is now $56.1 million – a robust increase from its already-increased earlier projections.

The salary-cap amount is determined in large part by the league’s revenues from the previous season. If the league had a good year, the cap goes up a lot the next season. But the league didn’t expect this to be a good year. Due to the worldwide economic downturn, Stern notified teams in a memo last July that the 2009-10 cap was to be set at $57.7 million, a 2% drop from $58.67 million the year before, because revenues weren’t meeting expectations. He then lowered an even bigger boom, warning teams to expect the salary cap for the 2010-11 season to fall even further, all the way down to between $50.4 and $53.6 million, which was based on an expected 2.5% to 5% decline in revenues.

It was forecasted to be the biggest drop year-over-year drop in the cap in N.B.A. history, and by a long-shot. Prior to that day, since the N.B.A. instituted a salary cap starting with the 1984-85 season, the cap had only ever declined one time from the previous season, in 2002-03, and that was only due to the allocation of a massive new ABC/ESPN television contract which was to pay out $4.6 billion over six years, far more than the previous NBC contract, but allocated less to 2002-03 than NBC paid in 2001-02. Now the league was looking at two consecutive drops, totaling as much as 14%.

The N.B.A.’s advice to teams at the time was both simple and ominous: Be aware of this projected decrease and plan accordingly.

Many teams headed that warning. The gloom-and-doom projections led to teams being more conservative, selling off assets at bargain prices in order to create additional cap space. In that regard, the players’ union might have a bone to pick now. They can’t be too happy that teams were forced to take such action based on preliminary projections that are turning out to be nowhere near true. They’ve even threatened to file a collusion lawsuit if the league did not have a good-faith basis to predict such a precipitous drop.

The league periodically revises its projections as the season progresses based on economic conditions and revenues. At around the All-Star break, it revealed that the cap likely would fall on the high side of the earlier projections - somewhere in the $53-54 million range.

A cap as high as $56.1 million comes as a complete surprise. It still represents a drop of about $1.6 million from the current cap, which translates to an approximate 0.5% drop in revenues from last season. But it makes a huge difference for teams that were hoping to use the huge 2010 free-agent market to build a perennial powerhouse.

Teams that were a little short of being able to offer the full maximum salary to premier free agents will now find themselves with sufficient cap room to do so. Teams that were resigned to letting go of their own free agents to create cap room now have the ability to hang on to a player or two – signing a free agent and preserving some of their depth at the same time.

The revelation mattered most to the teams that dreamed the biggest. Teams with significant cap space that will be positively affected by Friday’s news include the New Jersey Nets, New York Knicks, Chicago Bulls and Los Angeles Clippers.

Teams that are hurt the most by the revelation are the teams that had the most to lose, namely the Cleveland Cavaliers, who now have to compete with a host of other teams that can offer some fairly compelling packages for the ongoing services of LeBron James.

Nowhere is that more true than with the Miami Heat. The latest cap projection puts the Heat within a mere $1 million of being able to offer three full maximum contracts. It makes the once-thought-to-be-ludicrous dream of pairing James, Dwayne Wade and Chris Bosh in South Florida, for the first time, an imminently real possibility. It was a quietly huge revelation for Heat fans everywhere!

The finalized salary cap numbers will be determined in the first week of July.

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