Why potential Tyler Herro extension creates sense of urgency for Heat this offseason

There’s a sense of urgency surrounding the Miami Heat’s pursuit of Brooklyn Nets forward Kevin Durant and Utah Jazz guard Donovan Mitchell.

Not just because it’s unclear when the next big name could become available and Heat star Jimmy Butler turns 33 in September, but also because one of Miami’s top trade chips could become very difficult to include in a deal very soon.

Heat rising star Tyler Herro, who was named the NBA’s Sixth Man of the Year this past season, is eligible this offseason to sign a contract extension worth as much as $188 million over five seasons with a first-year salary (2023-24) of $32.5 million. He can sign for five years — instead of four — only if he gets a max contract.

Herro, 22, will earn $5.7 million this upcoming season in the final year of his rookie deal.

As a young player with All-Star potential, Herro is at the center of nearly every hypothetical Heat trade offer for a star and is expected to be at the center of nearly every offer the Heat makes to land either Durant or Mitchell.

The issue is that if Herro signs an extension with the Heat, he would essentially be untradeable until the 2023 offseason.

Why? First-round picks (Herro was a first-round pick in 2019) who receive extensions before their fourth NBA seasons are subject to the “Poison Pill Provision,” which would make it difficult for the Heat to include Herro in a trade until July 1, 2023.

This provision means when that player is traded between the date the extension is signed and the date it takes effect, the player’s trade value for the receiving team is the average of the salaries in the last year of their rookie scale contract and each year of their extension. But the outgoing salary in the trade for the sending team is the players’ actual salary for that season in the last year of their rookie scale deal.

Recent history with players of or close to Herro’s caliber entering their extension window indicates his extension could fall in the range a four-year contract worth around $25 million per season. Jaylen Brown signed a four-year, $107 million extension with the Boston Celtics in the 2019 offseason and Mikal Bridges signed a four-year, $90 million extension with the Phoenix Suns last offseason.

So if Herro hypothetically signs a four-year extension worth $104 million, the acquiring team would take him in at about $22 million for salary-matching purposes in a trade while the Heat would send him out at his $5.7 million salary for this upcoming season because of the “Poison Pill Provision.”

This would make it nearly impossible for the Heat to trade Herro until his extension takes effect next offseason for a few reasons:

▪ With the Heat dealing away Herro at $5.7 million for trade purposes while below the luxury tax line, it can only take back 175 percent of the outgoing salary plus $100,000. That means Miami would only be able to acquire about $10 million in salaries in this trade.

▪ Since the Heat is only able to take in about $10 million in this deal, the other team would not be able to acquire Herro’s $22 million incoming salary in this hypothetical scenario unless it had the necessary cap space to take in the extra $12 million. That’s because teams without cap space who send out about $10 million are limited by NBA salary cap rules to taking back a maximum of $15 million if they are not in the luxury tax and about $12.6 million if they are in the luxury tax as part of this trade.

In other words, it would be very hard for the Heat to trade Herro for the entirety of this upcoming season if he signed an extension because the discrepancy between his incoming salary and outgoing salary for trade purposes would be so wide.

A legal trade could only be completed in this scenario if both teams add additional salary to the transaction or if they include a third team that is able to absorb some of the excess salary.

Because signing Herro to an extension would clearly limit Miami’s trade options, the expectation is the Heat will wait for clarity on Durant and Mitchell before making such a move.

The good news for Miami is that it has time to allow things to play out, as the Heat and Herro have a mid-October deadline (the final day before the start of the regular season) to reach an agreement on an extension. If an extension isn’t agreed to, Herro will become a restricted free agent in the summer of 2023.

Herro closed this past regular season as the Heat’s second-leading scorer with a career-high 20.7 points per game in a bench role to become the first player in franchise history to win the NBA’s Sixth Man of the Year award. Herro did it while shooting a career-best 44.7 percent from the field and 39.9 percent from three-point range, while averaging a career-high four assists in his third NBA season.

Herro’s production dipped this past postseason, as he averaged just 12.6 points while shooting 40.9 percent from the field and 22.9 percent from three-point range and 2.8 assists in the playoffs. A groin injury also forced Herro to miss part of the Eastern Conference finals.