What Could a Henderson Alvarez Extension Look Like?

With Christian Yelich‘s extension being finalized (which I wrote about here), the Marlins now have two-thirds of its outfield locked up to long-term contracts. The team tried to engage agent Scott Boras on extensions for center fielder Marcell Ozuna and ace Jose Fernandez, but Boras has shown he isn’t interested in starting negotiations for either player at this time. While that is unfortunate, the Marlins do have one other player they should look to extend: starter Henderson Alvarez.

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Alvarez currently has a little more than three years of service time and he was arbitration eligible for the first time this winter before he and the Marlins agreed on a one-year, $4 million deal for 2015. Right now, Alvarez is sort of a tweener: he isn’t looking for the multimillion dollar guarantee that pre-arb players look for, but he also isn’t quite looking at free agency as he’s still three years away. Extensions don’t often get signed by pitchers in this service time class and when they do, they usually only cover arbitration years. Johnny Cueto and Ervin Santana signed four-year guarantees and Wade Miley signed away his arbitration years last month with his contract including a club option for a fourth year. While Cueto’s deal contained an option for a fifth season, none of these deals have guaranteed more than four seasons. Oftentimes, agents are looking to secure future salaries while teams are looking for cost certainty. Cueto was willing to sign away two free agent years because he is set to hit the open market following his age 29 season.

So there are a number of factors in play here. The Marlins could look to extend Alvarez only through his arbitration years to acquire cost certainty. Then, they could worry about re-signing him at a later point. There would be nothing wrong with this strategy. Alternatively, the Marlins could look to make Alvarez a much bigger part of this team’s foundation and sign him to a five-or-six-year deal.

Regardless, we need to start with his arbitration years. There are a couple of solid comparables here. First, let’s get an idea of what he would earn were he to go year-to-year through arbitration. Doug Fister has been better than Alvarez, but they both have the same skillset. Alvarez might possess a higher ceiling than Fister, with Alvarez certainly tapping into that potential more and more each season, but all things considered this is a good example. Fister’s arbitration figures are $4m, $7.2m, and $11.4m, totaling up to $22.6m earned through arbitration. If Alvarez continues on his current track, we could see him earn $4m (already agreed to this year), $8m, and $12m through arbitration, totaling $24m.

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Let’s now look at an extension that only covered a player’s arbitration years. Lance Lynn signed such a deal two months ago and is now guaranteed $22m over his three arbitration years. Lynn and Alvarez were expected to earn the same amount through the arbitration process had either gone through, so these two are very strong comparables.

Ultimately, I say splitting the difference between $22m and $24m and guaranteeing Alvarez $23m over his arbitration years is fair. His salaries could resemble something like what Fister got through his trips through arbitration. Even if the Marlins don’t extend him beyond three years, it’s great to get cost certainty over one of your top arms with the possibility of getting a bargain if he takes that next step to stardom.

Securing those guaranteed salaries might be great for Alvarez and the team, but the Marlins might want to secure some free agent years as well. However, Alvarez would be delaying his chance at free agency, so the Marlins would need to give him a big enough commitment to make it worth it for him. The team would want more than one free agent year, but Alvarez’ agent wouldn’t want to give up too many free agent years. Alvarez has youth on his side, as he is currently set to hit free agency following his age 27 season.

The ultimate compromise would probably be two free agent years valued at $15m each, with a club option for third free agent year (sixth year of control) valued at $17.5m with a $2.5m buyout. The buyout effectively mean Alvarez’ sixth year would cost the team $15m since the buyout would guarantee Alvarez $2.5m anyways. That would give Alvarez a nice payday while also letting him hit the market following his age 30 season, enabling him to sign another lucrative deal.

So $23m for three arbitration seasons plus $30m for two free agent years plus the $2.5m buyout brings the guarantee up to five years and $55.5m. With the option exercised, the full value would be $70.5m. This closely resembles the deals signed by pitchers like Ervin Santana, Ubaldo Jimenez, Matt Garza, and James Shields. While none of these deals are perfect comparables, it gives the general idea of what this kind of money could afford on the free agent market. You could get four years of an average starting pitcher or four years of a very good 33 year old one.

Signing a good young starting pitcher that has the potential to be a very good young starting pitcher to a deal like this would be a very smart and proactive move. The Marlins have done well to lock up the prime years of key contributors and while it’s not likely Ozuna or Fernandez are going to sign away their prime years any time soon, Alvarez might be willing to listen.

At the very least, acquiring cost certainty over his arbitration years is critical as the team looks to add payroll each year as they attempt to establish themselves as perennial contenders.

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