Max cap room, cap holds and stretch provisions: Where the Orlando Magic actually stand

The Orlando Magic are hamstrung entering free agency. But they can find some flexibility depending on what their own free agents do and one big contract.

Free agency brings with it a lot of excitement.

Fans at the very least, brim with excitement over the potential of adding new stars to the team. The intrigue of where players may land and how the league might shift and change is the kind of drama the NBA is well known for.

The top teams, usually saddled with big salaries look for whatever maneuverability they can find to get that key player to put them over the top (see: Houston Rockets trying to trade Eric Gordon or Clint Capela to make a run for Jimmy Butler). It is always a tricky balance and a difficult challenge to add new players when bumping up against the salary cap.

The better teams carefully plan their cap room to align with big-name free agent summers. They give themselves the chance to make splashy moves. That is what the Orlando Magic did in getting Tracy McGrady and Grant Hill (and almost Tim Duncan) in 2000.

This summer sees the Magic in a bit of limbo when it comes to participating in the free agent market.

The timing feels right to make a bit of a splash. Orlando is coming off its first playoff appearance in seven years and looks like a much more attractive place for free agents to land if they trying to win.

But the reality is the Magic still do not have a ton of cap room to spend. They still have big contracts sitting on their books and bigger decisions to make with their own free agents in Nikola Vucevic and Terrence Ross.

That will hamper their ability to add new players. But there are options to get better and add some major impact players. It just depends on what the Magic want to do, who the Magic can get and how they handle their own free agents.

The Magic are still a relatively young team though. They had the youngest lineup of any team in the playoffs last year. Their future feels bright.

But still precarious.

Orlando certainly could be — and probably should be — active in free agency and the trade market this offseason. The team does not want to rest too far on its laurels following their surprise playoff appearance. They still have a lot to improve upon and get better.

To be sure, the Magic have a lot of big decisions to make this summer. And everything they do will revolve around their own free agents first.

As things currently stand, the Magic have $85.5 million in salary committed to next season (that includes the team picking up Wesley Iwundu‘s team option for 2020). They will sign Chuma Okeke and he will make roughly $3 million under his rookie contract. So if the salary cap is $109 million as expected, the Magic enter the summer with a raw total of $20.5 million in cap space.

That would be enough to go after a high-level starter, but not a max player. The big contracts of Evan Fournier ($17 million) and Timofey Mozgov ($16.7 million) weigh heavily at the moment.

But the team still has to operate as a team over the salary cap. If the Magic intend to retain their free agents — Nikola Vucevic, Terrence Ross and Khem Birch — doing so will put them over the cap.

Just on a mathematical standpoint, Vucevic will make more than $20.5 million in cap room the Magic might realistically have. The team was always going to have to use Bird Rights to sign those players — a cap mechanism that allows teams to go over the cap to sign their own free agents.

In order to retain those Bird Rights for those players, the team has to maintain a cap hold on their books. Essentially this is a placeholder salary that forces teams to deal with their own free agents.

So for the Magic to retain Vucevic or Ross, they would have a placeholder amount on their books to keep their rights.

Vucevic’s cap hold is $19.1 million and Ross’ cap hold is $15.8 million. That is why the Magic are operating as if they are over the cap. To retain both of them puts them over the cap — until they sign their new contracts and the new amounts enter the books.

But even choosing to retain just Vucevic puts the team just under the cap (and if they include Khem Birch and his $1.8 million cap hold it puts them over the cap).

If the Magic want to retain either of their big-ticket free agents, that would leave Orlando with just the non-taxpayer mid-level exception of roughly $9 million to spend. That can be used on one player or split among several players.

That is why the Magic are relatively quiet this year in free agency.

Losing either Vucevic or Ross opens up some space, but still limits what they can do.

There is one more option of course to create some space. Orlando has the ability to stretch contracts they waive. And it seems inevitable if the Magic want to make any splash in free agency that they would stretch Timofey Mozgov’s contract.

What the stretch provision does is it enables the team to stretch a player’s cap hit over twice the length of the contract plus one year. Mozgov has one year left and is owed $16.7 million. Stretching his contract would spread that amount to $5.6 million over three years.

It would hurt to have some dead money — especially that hefty amount — on the books for three years. But it would create an extra $11 million in space the Magic could use in free agency this year.

That is how the Magic can get to max cap room.

With Mozgov’s contract stretched and all cap holds renounced, Orlando can get to $31.6 million in cap room. That is enough to make a major signing. Although using it on a max player would eat up the entirety of the cap room — essentially trading three players for one with no further maneuverability.

It seems unlikely Orlando would go after a max player for that reason. Their desire at the moment is to retain their own free agents. Even keeping one of them will severely limit their cap room and flexibility this summer. And that handicaps what they can do unless they stretch Mozgov’s contract.

Things for this team do get interesting if they lose out on either Vucevic or Ross. Then they get some sizable cap room they can spend without stretching Mozgov’s contract. But that is really the only way the Magic to create some maneuverability.

It’s both re-signing or none re-signing to make up some room.

The beauty of stretching Mozgov — or even renouncing the cap holds — is they do not have to use those tools until they need them. There is no deadline to stretch Mozgov’s contract and if the Magic want to sign someone that would require renouncing the cap holds on Ross or Vucevic, they do not have to do so until they are ready to sign those players.

Orlando can operate on both tracks — as if they will re-sign their own free agents and as if they will go out and sign new players.