The Heat made a sizable longterm investment in one of its key young players on Sunday, giving guard Tyler Herro a four-year extension that could be worth as much as $130 million.
The deal will pay him $120 million guaranteed with another $10 million in incentives, according to two sources.
The extension essentially makes Herro untradable for the next year because of arcane NBA salary cap rules.
The sides had been discussing a potential extension since early July, according to a source.
And the new deal means Herro, 22, will be under contact to the Heat for the next five seasons.
“Tyler is an impact multi-faceted player and we are excited to have him signed for the next five years,” Heat president Pat Riley said in a statement on Sunday evening. “His improvement every year since we drafted him has led to this day. We believe he will continue to get better.”
Herro, who won the NBA’s Sixth Man of the Year award last season, will earn $5.7 million this upcoming season in the final year of his rookie deal.
“I want to be here. I want to be in Miami,” Herro said last week when asked if he hopes to sign an extension with the Heat in the coming weeks.
“But I’m not rushed to sign anything. It’s got to make sense for me and my family. I’m not just going to sign anything. I see the market, I see what guys got paid and I know my worth. So I’m looking for the right number.”
The Heat and Herro agreed on a contract that will average $30 million a year, plus the potential of $2.5 million per year in incentives.
Herro was eligible to receiver a five-year deal worth as much as $188 million. Any extension under that maximum dollar figure could not span longer than four years, according to NBA rules.
The sides faced an Oct. 18 NBA deadline to agree to a contact extension.
Herro ended up getting more money than the rookie extensions of Boston guard Jaylen Brown, who snagged a four-year, $107 million deal in 2019, or Phoenix’s Mikal Bridges, who signed a four-year, $90 million extension in 2021.
The Knicks’ RJ Barrett signed a four-year rookie extension that could be worth as much as $120 million earlier this summer. Herro’s deal could top that.
The extension essentially takes Herro off the trade market until next summer.
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.
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.
So if a disgruntled star becomes available this season, the Heat likely would not be able to trade Herro as part of a package.
Herro closed last regular season as the Heat’s second-leading scorer with a career-high 20.7 points per game in a bench role. He 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.
His scoring average was fourth all-time in a single season for an NBA Sixth Man of the Year winner, behind Lou Williams, Eddie Johnson and Ricky Pierce. The award has been given out for the past 40 years.
Herro reiterated last week that he wants to be a starter this season. Heat coach Erik Spoelstra has been non-committal about that.
“I’m trying to be a starter. I think they know that,” Herro said. “I plan on starting Game 1. But I don’t know what they think. So we’ll see what happens.
“I’m going to continue to play hard and continue to prove my worth as a starter and show that I can play off Jimmy [Butler], Kyle [Lowry] and Bam [Adebayo]. That we can all work and play together.”
Heat president Pat Riley said in early June of Herro: “I saw improvement in his defense this year. He’s got great feet. He’s got quick feet. He just needs to get stronger again and another 10 pounds of muscle mass and he just needs to get stronger from a leverage standpoint because I think he still has a lot of upside.”
“I take it in like it was a challenge,” Herro said when asked how he viewed Riley’s challenge. “If somebody challenges me, I’m going to take it as a challenge. That’s how my personality is, that’s what I do.
“And it’s not coming from just anybody. It’s coming from Pat. He wants the best for not only his team, but at the end of the day he wants the best for us individually, as well. If he challenges me, I’m going to take it on.”
The Heat has consistently given extensions to play who were productive during this rookie contracts.
Bam Adebayo received a five-year, $163 million max extension off his rookie deal, while Justice Winslow (three years, $39 million) and Josh Richardson (four year, $42 million) received smaller extensions from the team.
