A thorough look at how a cleverly front-loaded deal with an early opt-out could help the Mets land Cespedes at a reasonable price.
A great deal of virtual ink has been spilled recently regarding slugger Yoenis Cespedes and his eventual free agent destination. Most recent reports indicate that he is currently deciding between offers from New York and Washington:
If reports are to be believed, Cespedes currently has an offer from the Nationals in the neighborhood of five years and a little more than $100 million, with some of the money deferred a la Max Scherzer’s recent deal. The Mets, it is reported, have the parameters of a three year deal out to Cespedes, the average annual value of which is unknown. But there is one more thing…
Reports from all over the place have indicated that Cespedes loved his time as a New York Met, and might be willing to take less money in order to stay. But what does Cespedes really want? And what do the Mets really want? It is the intersection of those desires that will end up with a deal that is beneficial for both parties. I like to deal in “win-win” scenarios, and there is a very obvious one here.
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What Cespedes Wants
Cespedes was a superstar last year, batting .291/.328/.542 with 35 home runs and 6.7 WAR. So how come he isn’t getting offers on the free agent market that match that reputation? Two reasons: because he’s only done it once, and because this year’s free agent class was very strong.
Therefore, if Cespedes cannot get the huge mega-deal that he wants this offseason, it would behoove him to sign a contract which would allow him the ability to opt-out next season if he can replicate his superstar production, and compete against a weaker free agent class. He would not, however, want to take only a one year deal. As this is his first (and potentially only) chance at a big payday, he won’t want to walk away from guaranteed dollars.
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What the Mets Want
This one is harder, because the Mets have acted quite erratically this offseason. Obviously, they want Yoenis Cespedes to return, but it seemed all offseason like they didn’t think they would be able to afford him. But why? The Mets have doled out almost $30 million in contracts for the 2016 season to a number of players, including Antonio Bastardo, Bartolo Colon, Jerry Blevins, Asdrubal Cabrera, Alejandro De Aza and an expensive arbitration tender to Addison Reed.
If the Mets had that money, why not give it to Cespedes, who would do more to improve the team than most of those players combined? The answer, of course, is likely to be complicated — but it certainly appears like the Mets are not able to enter into any long-term commitments. None of the above contracts is longer than two years, and they also traded Jon Niese for Neil Walker, trading away two inexpensive options in exchange for one year of Walker.
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How to Make It Work
Cespedes wants guaranteed dollars, but deep down he really wants to opt-out. The Mets want Cespedes back, but they really don’t want to be on the hook for a long-term deal. The obvious solution? Give him the security of a long-term deal, should something cataclysmic happen to him — but make it so that in reality, the opt-out is almost certainly going to be exercised.
First, what is Cespedes’s actual value? Fangraphs’s Craig Edwards estimated his value using Steamer as follows:
I thought it was unreasonable to project Cespedes for only 3.1 WAR after a season of 6.7 WAR, so this is my own estimate, based on the 50/50 split between Steamer and a 5-3-2 weighting of his most recent seasons:
Let’s use the presumption that Cespedes is worth somewhere around $95 – $120 million over five years as a starting point. How would a deal with an opt-out look in order to benefit the Mets and Cespedes the most? Note: including an opt-out in the deal is a benefit to the player, so players are willing to accept a reduction in the average annual value of their salaries in order to get one.
Assuming the Nationals have offered a five year, $100M deal without deferrals, the net present value of that deal is $94.4 million (assuming a 3% discount rate and equal salaries). If part of that money is deferred, the net present value is even less.
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Here is how the contract would be structured. Five years, $87 million, front-loaded, opt-out after the first year. “But, Brian, the Mets won’t offer $87 million!” Sure, they will, if they are smart. Here’s why — you make the opt-out irresistible.
- 2016: $23 million
- 2017: $16 million
- 2018: $16 million
- 2019: $16 million
- 2020: $16 million
By the conclusion of 2016, one of two things will have happened. Either Cespedes will have a good season (3 WAR or more, likely closer to 4 or 5 if he is healthy) and he will opt-out of the deal, seeing more than the four years, $64 million remaining on his contract, while he is still only 31 years old. Or Cespedes will have a down year, in which case the Mets will only be paying Cespedes, a potential star, the paltry sum of $16 million per season. To put that into context, the Mets are paying Asdrubal Cabrera $9 million and he will be lucky to put up 2 WAR in 2017.
What is the value of Yoenis Cespedes on a one year deal? Fangraphs’s terribly pessimistic estimate is $24.4 million. My estimate is $32 million. According to Fangraphs he was worth $53.9 million (!!!) last year alone. If Cespedes opts-out, the Mets will have succeeded, in that they have received an All-Star level performance for only $23 million. If Cespedes doesn’t opt out, those future years will be affordable, even for a team that is shy about committing future years.
The net present value of the deal proposed above is $82.4 million, with an opt-out, which is fairly competitive with the Nationals $94.4 million offer, especially if that offer includes even more deferred money.
Either way, it’s a win-win. Cespedes gets his payday which sets him for life, while retaining the ability to test the market next winter. The Mets bring back their superstar for a very realistic run at the 2016 World Series, without committing to expensive future years.
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Brian Mangan is an attorney in New York City that is not afraid of numbers. He might not be using them right, but heck, he’s not afraid.