NBA AM: Analyzing the Puzzling Donatas Motiejunas Contract Situation

UPDATE: On December 15, the Rockets announced that the team will renounce Donatus Motiejunas, following lengthy discussions with his representation, as well as the league office.

“Donatas was a true professional throughout his four seasons with the Rockets,” said Rockets General Manager Daryl Morey in a statement. “We wish Donatas the best moving forward and want to thank him for his contributions both on the court and in the community.”

The following update and story below describe the curious case of Motiejunas.

UPDATE: The Houston Rockets have reportedly reached a new deal with forward Donatas Motiejunas. The deal structure is said to be very similar to the original matched offer sheet from the Brooklyn Nets and includes just a single fully guaranteed year.

The NBA has been generally confused by the semi-resolution of the Donatas Motiejunas matched offer sheet with the Houston Rockets.

Basketball Insiders reached out to several front-office executives from both the Eastern and Western Conference. The off-the-record consensus has been that of puzzlement.

Why did he sign such a Houston-friendly offer sheet with the Brooklyn Nets? What is he trying to achieve by refusing to report for a physical?

Motiejunas was a notable contract holdout, unable to find a workable deal with the Rockets as a restricted free agent. Instead, he signed an offer sheet with the Nets on December 2 for $37 million over four seasons.

Normally when a team is attempting to pry away a restricted free agent from another team, it makes the contract as ugly as possible to discourage a matched offer sheet. Instead, the Brooklyn deal with Motiejunas looks like the Nets were doing a favor for B.J. Armstrong, Motiejunas’ agent with Wasserman Media Group, to help his client get suited up in Rockets’ red.

Clearly, that’s not the case as Motiejunas has still not made an appearance in Houston even though he is now under contract with the franchise.

A good example of an “ugly” offer sheet is the one the Nets signed with Allen Crabbe over the summer, which was still matched by the Portland Trail Blazers. Crabbe got paid more than his production warranted to date ($74.8 million over four seasons), with a 15 percent trade bonus and a player option on the final year.

Similarly, a relatively unproven Tyler Johnson received a four-year, $50 million offer, also from Brooklyn, and again with a 15 percent trade bonus and a player option. The Miami HEAT matched that offer sheet as well.

The offer Motiejunas received has a very different look to it. He isn’t overpaid. He has no trade bonus. It’s mostly non-guaranteed and it contained significant incentives that the Rockets will not match.

Motiejunas is only promised $5 million until January 10, at which point the first year in his deal guarantees in full. His last three years are completely non-guaranteed until a cut-down date on March 1, 2017 and in July of both 2018 and 2019 (seven days following the end of the annual moratorium).

Because of timing, Motiejunas cannot be traded by the Rockets this season but the franchise should have no problem unloading such a team-friendly contract in the offseason.

The incentives included in the Brooklyn offer are especially problematic for Motiejunas. He signed for $37 million but will lose $6 million of that in Houston. The Rockets are only responsible for $31 million, the principle amount of the contract.

He’ll earn $8.3 million, $7.9 million, $7.6 million and $7.2 million over the next four years — again, with just $5 million of the first season guaranteed.

Motiejunas had a body-fat/weigh-in bonus of $1 million, along with two separate unlikely bonuses of $250,000 for the 2016-17 season, based on playing 70 percent of the team’s regular-season games along with a performance goal of 6.5 defensive rebounds per 36 minutes and a 37 percent three-point percentage (on at least two attempts per game).

For each of the last three seasons of his original deal, he had a $750,000 body-fat/weight bonus, a $250,000 bonus for participating in an off-season skill and conditioning program, along with the same pair of $250,000 unlikely performance incentives.

Right off the bat, unlikely bonuses are not included in a contract match, which reduces his contract immediately by $2 million. The tricky part of the equation is the $1 million per season offseason bonus.

It’s safe to say, though it may be nothing more than educated speculation, that Armstrong expected that $4 million in offseason bonuses to apply to the Houston match.

Alas, it does not.

The actual Collective Bargaining Agreement language on the subject states, “The only elements of such Incentive Compensation that shall be included in the Principal Terms are the following: (A) bonuses that qualify as Likely Bonuses based upon the performance of the Team extending the Offer Sheet and the [Right of First Refusal] Team; and (B) Generally Recognized League Honors.”

An unlikely incentive is not included in a player’s salary cap number. If they earn it, the bonus becomes likely for the following season and the salary cap figure is adjusted upward accordingly. In the case of offseason incentives, however, those figures are also included in a player’s salary cap hit, as if they were considered likely.

The Rockets would be responsible for matching a likely incentive. Motiejunas had a total of $4 million in offseason incentives that are very similar to — but not actually — likely incentives. That’s a significant part of the difference in the $37 million offer from Brooklyn and the $31 million contract in Houston.

Motiejunas is now a Rocket. If he doesn’t show up to play, the team won’t have to pay him his salary, but he’ll still be a Rocket nonetheless.

The team designated him as inactive on Wednesday against the Los Angeles Lakers. That suggests, though not definitively, the team waived Motiejunas’ physical and have accepted his contract as is — otherwise, why else would a team list a player that is not officially under contract on their inactive list?

There may be another explanation. If so, it isn’t likely to change Motiejunas’ fate. Even if Houston ripped up the signed offer sheet, one that is extremely favorable financially to the team, Motiejunas would just return to restricted free agency.

Puzzling indeed.