Chandler Parsons and Houston’s Game of Dominoes

It says something about the wider perception of Houston that the Rockets, by reportedly settling on a mundane roster move — making Chandler Parsons a restricted free agent this summer, as reported first by Yahoo and the Houston Chronicle — have spawned a host of theories about how the move connects with their pursuit of Carmelo Anthony and Kevin Love.

The Rockets are the NBA’s new bogeyman after dealing for James Harden and convincing Dwight Howard to take less money and leave the Lakers. They are what the Lakers were just two years ago — the dread rival other teams assume, with an eye roll and a shrug, will somehow pull off the heist of another star. Fans, media, and even a few front-office executives from other teams overstate Houston’s cap flexibility and collection of trade assets.

The Rockets have a choice with Parsons: decline his insanely cheap $964,750 team option for next season and make him a restricted free agent now, or ride out that option and watch Parsons walk into unrestricted free agency in July 2015. The choice is born out of the four-year contract Houston signed Parsons to, and out of the quirky rules and trends governing how teams compensate second-round picks.

A four-year contract for a second-round pick gives a team control of a player at a cheap price for the longest possible time. Houston was among three or four teams that over the last decade have pioneered the practice of hard negotiations to get their second-rounders on four-year deals. But there’s a trade-off: Have a second-rounder on the books for four seasons under the same deal, and he becomes an unrestricted free agent after Year 4.

This is what has happened to Lance Stephenson. The Pacers chose to keep Stephenson under the terms of his first contract for all four seasons, and Stephenson is now set to be an unrestricted free agent as a result.

Houston will get matching rights now on Parsons, who immediately becomes one of the most desirable wing free agents available. Gordon Hayward’s agent is probably not happy another young wing guy, one with a better NBA track record, will join Hayward in restricted free agency.

But the move comes at a cost for Houston, too. Let’s say Parsons produces about $10 million of on-court value per season, and will come in around that number every season over the next half decade. Houston is passing up a chance to get that $10 million in hoops value next season for one-tenth the price.

Assuming Houston re-signs Parsons in July, the move also cuts into the Rockets’ potential cap space for 2015, taking them out of the max-level free-agent sweepstakes that summer. Houston with Parsons at market price can’t plausibly get more than $10 million or so in cap room a year from now.

Which is why people assumed immediately upon reading this week’s Parsons news that Houston must have something cooking now. In reality, Houston has been leaning toward going this route for at least a year, according to several sources familiar with the situation. On a very basic level, the team fears Parsons’s entry into unrestricted free agency. Houston has a nice relationship with Parsons’s lead agents, Dan Fegan and Happy Walters, but Fegan is a powerhouse who steers clients toward the biggest windfall. Incumbent teams still almost always keep their guys, but there is at least some risk in unfettered courtship.

Making Parsons a restricted free agent gives Houston control of the process. It may also depress Parsons’s market value. There are always one or two restricted free agents who sit untouched for weeks, since teams with cap room just assume the incumbent team will match any offer. What’s the point of tying up your cap space for three days for nothing?

Gerald Henderson was probably the best example from last year’s free-agency class. Nikola Pekovic’s restricted status also repelled suitors, but that could just be because Pekovic is a scary human being in general. And Pekovic ended up squeezing a robust deal from Minnesota even though the market had dried up, leaving him almost no leverage.

Other recent restricted free agents, including Eric Gordon, Nic Batum, and Roy Hibbert, have drawn massive offer sheets from rival teams. Parsons is a wing, and wing is the thinnest position in the league; Batum might be the fourth-best small forward in the league, and two of the guys above him, LeBron James and Kevin Durant, play a hefty amount of power forward. (Andre Iguodala would have a lot to say about this, too.)

So Houston is really doing a simple, predictable thing here.

But we are still talking about the Rockets, so you know they are juggling at least a half dozen contingency plans for free agency. Making Parsons a restricted free agent actually eats into their space. They could have had Parsons on the books for that $964,750 figure next season, but going this route kicks in two separate provisions on the collective bargaining agreement that jack Parsons’s interim cap hit for next season up to about $2.86 million — until he signs his new contract.

Boom: Houston has just cost itself $1.75 million of potential cap space.

Here’s the thing: Houston has no cap space. None. People talk about the Rockets as if they are some looming free-agency Venus flytrap, but they have to take several steps to become any sort of threat.

They must trade both Omer Asik and Jeremy Lin to achieve meaningful cap room, and the discussion surrounding these guys has too often given the impression Houston can just offload them easily — and even in conjunction. They will each count for about $8.4 million against the cap next season, but they will earn a cool $15 million due to the balloon payments built into the funky contracts they signed with Houston two years ago.

(By the way, do not doubt Houston’s ability to come up with more funky CBA stuff as the team negotiates the waters this summer. The CBA is super complicated, and there are always loopholes some teams don’t notice until another team exploits them.)

It’s hard to overstate how much of a turnoff that $15 million is. Sure, revenue-sharing has given every team an easy shot at profitability, but the margins in some places are still thin, and no one wants to spend an extra $7 million on a solid veteran guy who can bolt after one season. There are a handful of teams with the space to take both, as Utah did with Andris Biedrins and Richard Jefferson, but no one is dying to shell out $30 million combined for these guys.

The more likely scenario is Houston flipping them to separate places. There is an easy market for Asik among teams with cap space or trade exceptions — teams that can take Asik and send back zero in salary. Houston overplayed the Asik market in December, when it tried to gin up an auction-style bidding war that annoyed the rest of the league. The Rockets even asked Charlotte for the equivalent of three first-round picks in exchange for him, per sources close to the talks.

But some market is there. Boston had real interest in Asik, and it has both potential cap space and a $10.4 million trade exception leftover from the Brooklyn megadeal. The Celtics have their eyes on bigger things, including Kevin Love. That weekend jaunt to Boston was not a coincidence. Love is eyeing the Celtics, and they are eyeing him, and Love wanted to send a message — even if it amounted to a double bird right in Minnesota’s face.

The Wolves as I’m writing this just hired Flip Saunders to coach the team next season, which means Saunders the GM has hired himself after failing to lure Dave Joerger from Memphis. Saunders is a solid coach and a very good on-court tactician whose teams have generally performed well on both ends. The Wolves’ best (only?) hope of keeping Love is to become next year’s Blazers, exploding out of the gate and proving to Love they can be a strong playoff team over the long haul.

Saunders should help with that, but it’s dicey suddenly having him in both roles with such a massive organizational decision looming. And it’s possible Love is so sour that the end here is inevitable.

(Another aside: Love’s dalliance with the rest of the league is yet another reminder the league and union really crapped the bed in by making it so financially unrealistic for any star player to ever sign an extension with his own team. “Crapped the bed” might be strong, since the league has an interest in making free agency as spectacular as possible every summer. But it basically erased the extension as anything close to a viable option, and I’m not sure the intent was to go that far.)

Boston could deal for Love and still snag Asik for nothing. The Sixers are always around, and Houston GM Daryl Morey’s former deputy Sam Hinkie already helped the Rockets nab Howard by taking Royce White off their hands. I’ll say this: If Philly helps Houston again like that, the other 28 teams will be unhappy, even if the Sixers extract a first-round pick as the price of doing business.

Lin is a tougher sell. He’s not as good as Asik, and he’s a borderline starter at a loaded position. But he’s a market draw, and he has proven he will put up numbers if he has the ball in his hands a lot. Houston also owns all its first-round picks, plus a couple intriguing young players and international guys it could attach to Asik and Lin to grease the wheels.

If the Rockets deal both these guys for nothing in return, they would have only around $17.5 million in cap space. That’s about $5 million short of Anthony’s first-year max salary, and about $2.5 million below Chris Bosh’s max amount.

Dumping Donatas Motiejunas gets them closer, and Houston would probably also have to find a taker for Francisco Garcia’s player option. All of this assumes Houston trades out of the no. 25 pick or selects a guy it can stash in Europe. The Rockets could also dangle Terrence Jones, but they view him as a core piece going forward. They can hope Anthony might be willing to take a couple million less to join a loaded roster.

This is a really difficult juggling act. The Rockets are a potential contender, and they cannot afford to deal the Asik-Lin combination for nothing, whiff on Melo/Love/Bosh/whomever, and come back with a thinned-out roster next season.

Morey will likely try to have his cake and eat it too as the Rox navigate this process. He might not need to actually trade Lin and Asik. He might need only the threat of the trades — to let Anthony and the Knicks, for instance, know Houston could open up the requisite cap space in the time it takes to make two trade calls with the league office.

Get Anthony’s commitment, and boom, all the dominos fall. Signing an unrestricted free agent like this would be nearly unprecedented. The Heat got Bosh and James via sign-and-trades with cap space they had carved out years in advance, and other stars who bullied their way to specific markets did so via trade with at least one season left on their contracts.

The Rockets would also need Parsons’s cooperation to make all this work. If he signed an offer sheet with another team, the whole plan goes up in smoke. The second he inks a four-year, $40 million offer sheet with a rival, his cap hit jumps from that $2.73 million figure to the first-year salary of that offer sheet — something in the range of $10 million. Bye-bye, cap room. It would be tremendous entertainment to see a team do this just to screw the Rockets. Don’t dismiss that possibility.

The Rockets are trying to do what the CBA has attempted to eliminate — they want to go into the market, sign another team’s free agent, and then re-sign their own guy. They wouldn’t be the first to pull the trick, and even being able to try it is one of the benefits of drafting and signing a quality second-rounder like Parsons. It’s good to reward smart decision-making.

There may be some mutual back-scratching going on here: Parsons gets paid a year earlier (and remember, he has asked the Rockets over the last two years if it would be possible to get a raise) and in exchange stays out of the market. We’ll see.

Houston could of course sign-and-trade Parsons as an alternative, but going that route also requires his consent,and raises tricky base-year compensation issues and limits the pool of teams that can receive Parsons. They could also keep Asik and Lin for use in a trade for Melo or some other star.

They could trade Parsons without his consent midseason next year, and that may be the endgame here if Houston nabs another max-level free agent this summer. The Rockets may have concluded Parsons will have more trade value locked up in a decent long-term contract than he would on an ultracheap one-year option, with free agency looming.

Regardless: Houston potentially making Parsons a restricted free agent is a predictable move, long in the works. The rest of the Rockets’ offseason is going to be an adventure.

Filed Under: NBA, Chandler Parsons, Houston Rockets, Kevin Love

Zach Lowe is a staff writer for Grantland.

Archive @ ZachLowe_NBA