Heat exercises option in Dragic’s contract. What it means for the expected pursuit of Lowry
Facing a deadline of Sunday at 5 p.m. to make a decision that carried important salary-cap implications entering free agency, the Miami Heat took a deliberate approach.
Just a few hours before the deadline, the Heat ultimately decided to exercise the $19.4 million team option in Goran Dragic’s contract and declined the $15 million team option in forward Andre Iguodala’s contract.
The Heat was already considered one of the favorites to land Kyle Lowry in free agency before Sunday’s news, but the decision to exercise Dragic’s option solidifies Miami’s spot as the frontrunner to add the veteran guard, according to league sources. Teams can begin negotiating with free agents on Monday at 6 p.m. and officially begin signing free agents on Friday at 12:01 p.m.
With the Heat exercising the team option in Dragic’s contract, Miami is expected to operate as an over-the-cap team in free agency because the 35-year-old guard’s salary takes up most of the available cap space. If the Heat opts to move forward as a capped out team, the only way it would be able to acquire Lowry or another big-name free agent would be via sign-and-trade.
Dragic is now under contract with the Heat for next season, but his $19.4 million salary could be used to facilitate a potential trade for Lowry in the coming days. With Iguodala’s option declined by the Heat, the 37-year-old forward will become an unrestricted free agent.
The Heat is on track to enter free agency with six players who have guaranteed salaries for next season that total $92 million: Jimmy Butler ($36 million), Bam Adebayo ($28.1 million), Dragic ($19.4 million), Tyler Herro ($4 million), Precious Achiuwa ($2.7 million) and KZ Okpala ($1.8 million).
That means there are 11 players from Miami’s season-ending roster who will become free agents this summer: Trevor Ariza, Nemanja Bjelica, Dewayne Dedmon, Udonis Haslem, Iguodala, Kendrick Nunn (restricted), Victor Oladipo, Duncan Robinson (restricted), Max Strus (restricted) and Gabe Vincent (restricted). The Heat also declined the $1.5 million team option in the contract of developmental center Omer Yurtseven on Sunday to make him a free agent, but Yurtseven will stick with the Heat for summer league.
Next season’s salary cap and luxury tax line have not been finalized yet. The projections indicate the salary cap will be about $112.4 million and the luxury-tax threshold will be about $136.6 million.
Working as an over-the-cap team allows Miami to make the most of the Bird rights it holds for players like Oladipo and Ariza to exceed the salary cap to retain them. Sunday’s decision to exercise Dragic’s option does not impact Nunn and Robinson as restricted free agents, but it does erase the concern of their $4.7 million cap holds taking away from available cap space.
Another benefit of operating as an over-the-cap team? The Heat will have two exceptions available: the non-taxpayer mid-level exception for $9.5 million and the bi-annual exception for $3.7 million. As a room team, Miami would only have the $4.9 million room mid-level exception.
By moving forward as an over-the-cap team, the Heat can also still use Iguodala’s Bird rights to re-sign him despite already declining the team option in his contract. But this is viewed as unlikely, with speculation already beginning about a potential reunion with the Golden State Warriors in free agency.
The Heat remains very interested in Lowry and there is growing optimism that he could end up in Miami. But the Dallas Mavericks and New Orleans Pelicans are also expected to aggressively pursue the 35-year-old Lowry when free agency begins, and both teams could create $30-plus million in cap space at the expense of their own free agents. The Philadelphia 76ers also can’t be ruled out in the Lowry sweepstakes.
If the Heat moves forward as an over-the-cap team, as expected, a challenge it faces in acquiring Lowry is executing the sign-and-trade deal that it would take to add him to the roster. The Heat currently only has three players under contract with a salary greater than $4 million for next season — Adebayo, Butler and Dragic.
Lowry is seeking a contract this offseason that includes a starting salary between $25 million and $30 million with at least two guaranteed years, according to league sources.
The expectation is that Dragic’s $19.4 million salary would be included in any potential sign-and-trade transaction for Lowry to help make the trade math work. But at least one young player or even draft picks, which the Heat doesn’t have many of, would probably need to be included in the package to entice the Toronto Raptors.
In the hypothetical scenario that Lowry signs a deal with a starting salary of $27 million, the Heat would need to send out at least about $21.6 million in salary to complete the deal. Packaging the contracts of Dragic ($19.4 million) and Achiuwa ($2.7 million) would achieve that.
Of course, there’s also the possibility of getting a third team involved to facilitate the trade.
Miami could also still include Iguodala, Nunn or some of its other free agents in a double sign-and-trade with the Raptors for Lowry, but that would take some cooperation from Toronto and free agents involved in the deal. The Heat could also leverage the Bird rights of its own free agents to execute a sign-and-trade transaction for other free agents around the league.
Here’s one notable aspect of a sign-and-trade: Players acquired via a sign-and-trade must be signed to contracts for at least three seasons. The first year of the contract must be fully guaranteed, but the remaining seasons can be non-guaranteed.
If Lowry does end up with the Heat via sign and trade, one possibility is to add a partially guaranteed third year to the contract.
Miami would also be facing a $143 million hard cap that’s triggered when acquiring a player through a sign-and-trade. That should still give the Heat enough room to potentially re-sign Robinson and others while also using its full $9.5 million exception, but it’s still worth monitoring.
Dragic, who just finished his 13th NBA season, has spent the past six-plus seasons in Miami after he was traded to the Heat in February 2015. He is considered one of the best point guards in Heat history, as he has averaged 16.2 points while shooting 45.7 percent from the field and 36.5 percent on threes, and 5.2 assists in 391 regular-season games (282 starts) with the team.
Iguodala, who has played 17 NBA seasons, has been a consistent member of the bench rotation since he was traded to the Heat in the middle of the 2019-20 season. Iguodala’s numbers haven’t been gaudy, but coach Erik Spoelstra has praised his two-way on-court impact and his leadership skills as an experienced veteran who has won multiple NBA championships.
The Heat’s decision on Sunday helps set the table for free agency, but there’s still a lot to be decided on in the coming days.
This story was originally published August 1, 2021 at 2:45 PM.
