Evaluating the Whiteside/Howard Trade Proposal

Whiteside_Howard

Picture Source: The Monitor

Last week Real GM wrote a small piece on Dwight Howard’s happiness (or lack thereof) in Houston. In it, a prediction was made that during this season Howard would be traded to Miami for Hassan Whiteside. The crux of this prediction was that Miami would have a difficult time signing Whiteside due to his contract situation. While it is true that Whiteside’s contract situation is more complicated than most free agents, it does not necessarily put a team other than Miami in a better position to sign him as a result.

First, it is important to look at Whiteside’s contract and discuss why Miami’s options are limited when re-signing him this summer. Hassan Whiteside will be an Early Bird free agent because his contract with the Miami Heat was for two years only and he did not play for the Heat immediately prior to his current contract. This means if Miami is over the salary cap, they can only sign Whiteside using the Early Bird exception. The Early Bird exception allows a team to go over the salary cap to sign its own free agent, but the value of the first year of that new contract is limited to the greater of 175% of the last year of the player’s previous contract or 104.5% of the average player salary. In Whiteside’s case, this means that if Miami used it’s Early Bird exception to sign Whiteside, it could only sign him for a maximum of $5,997,225. This is miles below Whiteside’s free market value and would almost certainly lead to Whiteside bolting Miami for another team in free agency.

So if Miami is signing Whiteside for anything between $5,997,225 and his max salary of $20,826,000 Miami has to sign him using cap space. This could potentially be difficult not only because precious cap space has to be used on Whiteside, but aslso because Luol Deng is also an Early Bird free agent. However, because Deng makes a signifcantly higher salary it’s more than possible that Miami would not need to use cap space to sign him. This also means that Whiteside cannot sign a five-year contract with the Heat, which would be available if he was a Bird free agent, and is instead limited to maximum contract of 4 years, $93,922,920 if signs with another team in free agency or 4 years $97,882,200 if  he signs with the Heat (Note: Numbers based on $94M salary cap). Importantly, Whiteside’s Early Bird rights would transfer to whatever team he might be traded too. In other words, unless another team has more cap space than the Miami Heat, it is just as difficult for Whiteside to sign with any other team if Miami were to trade him this season.

Second, let’s examine what a trade for Whiteside might look like from Houston and Miami’s perspective in a two- or three-team trade. This season Dwight Howard is making $22,359,364. Because Miami is over the luxury tax level and would remain over the tax level after acquiring Howard, they would need to send approximately $17,967,491 in salaries in order to meet the salary matching rules and absorb Howard’s salary.The initial difficulty here is that Whiteside only makes $981,348.  Hypothetically, Miami could send Whiteside ($981,348), Deng ($10,151,612), Anderson ($5,000,000), and Haslem ($2,854,940) to Houston for Howard ($22,359,364) and Montrezl Harrell ($1,000,000).

In a strictly two team trade, Houston would need to waive one player to keep the maximum roster size of 15. Because the Rockets don’t have any non-guaranteed contracts, they’d be creating dead money on their cap sheet. Unfortunately for the Rockets, this means that one of their current players would have to be cut as the rules do not allow Houston to take on players unless there are available roster spots. This means GM Daryl Morey would be deciding between on court production and future cap flexibility as only Jason Terry and Marcus Thornton are under one year contacts (each for the veteran’s minimum). The silver lining for the Rockets (albeit a thin one), is that this trade would bring them under the luxury tax and as long as the waived contracts weren’t stretched it wouldn’t affect Houston’s cap space in the offseason. It’s important to note that in a three-team trade where a third team agrees to a salary dump, this could be avoided. An example of what Houston’s team salary might look like in this scenario can be found below:

HOU Team Salary_Whiteside.png

 

The Heat, on the other hand, would be absorbing an additional $4,371,464 in salary, increasing their luxury tax bill to $26,087,112. You can see their current team salary here.

My biggest problem with the suggested Howard/Whiteside swap is the idea that Houston is somehow in a better position to sign Whiteside this summer when the opposite is actually much closer to the truth. Take a look at Houston’s current team salary here. Let’s assume that the Rockets are only interested in re-signing Whiteside, Terrence Jones, and Donatas Motiejunas for the 2016-17 season and that Ty Lawson (who has been objectively awful so far this season) has his non-guaranteed $13,213,412 salary waived. In this scenario, Houston would have a team salary, including free agent cap holds, of $64,289,718. Any exceptions also need to be added to team salary in the offseason. If you add in the Midlevel and Bi-Annual exceptions, and the first round pick exception, Houston’s team salary would be $73,800,218. However, because all exceptions do not add up to the projected salary cap of $89,000,000, those exceptions are lost and cannot count against Houston’s team salary. So, if we’re assuming a salary cap of $89,000,000, Houston only has enough money to offer Whiteside a max contract of $20.8M in Y1 if their pick falls out of the lottery and goes to Denver.

The biggest hurdle here is that Jones and DMo are restricted free agents. If Houston is intent on keeping one or both of those players, that complicates the offseason strategy because any offer sheet that Jones or DMo signs will be on Houston’s cap sheet for at least 3 days. If I’m the Indiana Pacers, a team that could use help in the frontcourt, I would have no problem attempting to sign Terrence Jones to a pedestrian $12M/year contract. They would still have approximately $18M to entice Whiteside with while the offer is outstanding. This is somewhat of a win-win for Indiana. Either (i) Houston matches and keeps Jones, and you’ve already started negotiations with Whiteside, a player Houston can no longer afford or (ii) Houston declines to match, in which case you get front court help by signing Jones, still remain (though likely with some cap gymnastics) in the running for Whiteside. Dallas could offer Whiteside a max contract immediately after Indiana signs Jones to an offer sheet and still have about $9M to spend in free agency. The Lakers could hypothetically sign all three Houston free agents: offering Whiteside a max contract and signing DMo and Jones to offer sheets worth $12M/year. And a vast number of teams have a wealth of cap space. There are a lot of moving pieces in any scenario, but the point is that Houston would have to carefully manage the timelines and have a lot of confidence in their free agents sticking to the plan.

For Miami, it might make sense to trade Whiteside because barring a major move, they cannot sign both Whiteside and Dwyane Wade this summer and make a run at Kevin Durant in free agency. Although they can sign Wade using the Bird exception (thereby not requiring cap space), his cap hold is his max salary, which puts a serious restriction on Miami’s cap sheet. Miami will need to evaluate what they want their options to be this offseason in a scenario when they succeed in luring Kevin Durant and if Durant decides Miami is not for him. However, because Whiteside’s salary is so low, it will be hard to get an adequate return unless Miami trades him for another undervalued played (e.g. Jordan Clarkson) or a player who is still on his rookie scale deal.

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