From Scratch: How the Houston Rockets Got Here
Part One of a long-term case study on NBA team-building focuses on the events of the last four seasons in Houston that have lead to a full-scale rebuild
This publication is part of a long-term case study performed by Ray LeBov and Adam Spinella on team-building efforts in the NBA. The Houston Rockets are one of five teams central to the case study, and this publication serves as a primer with background information on why the Rockets were chosen for our study and why it begins in 2021.
When billionaire Tilman Fertitta purchased the Houston Rockets from then-owner Leslie Alexander for $2.2 billion in 2017, he did so in the most unique of ways. Fertitta, a successful businessman in the restaurant and casino businesses, only had $300 million of cash on hand at the time of sale. To finance the deal, Fertitta engaged in two types of transactions. First, he took out a loan from Alexander, with details on repayment and interest rate unavailable to the public. Second, he sold $1.4 billion in bonds, a move structured to allow Fertitta to avoid selling shares in his own company. Had he sold the shares required to finance the deal with Alexander, he would no longer be the majority shareholder of Golden Nugget.
More specifically, Fertitta sold $745 million of bonds maturing in 2024 at an interest rate of 6.75%, and $670 million of bonds maturing in 2025 at 8.75%, according to Forbes Magazine. Those deals left him highly leveraged, to the point where if the bond market would fall, Fertitta would stand to underdeliver to his investors.
When the coronavirus pandemic hit in 2020 and the market crashed as a result, Fertitta was hit from both sides. The consistent revenue stream from restaurants and casinos was halted, with in-person dining and gambling both casualties of stay-at-home orders and decreased travel. He also was crunched by the tightening of the bond market, costing him money he’d already promised.
It served as no surprise to those inside and outside the Rockets organization that following the Western Conference Semifinals appearance in October 2020 Fertitta would send down an organizational mandate: reduce payroll and avoid the luxury tax.
The beginning of the Fertitta era featured a willingness to spend in order to keep their successful group together. During the 2018 offseason, Rockets general manager Daryl Morey offered long-term extensions to Chris Paul (a four-year max contract despite him being 34 years old) and Clint Capela (five years, $90 million). Those two, along with reigning MVP James Harden, were the team’s best players coming off a 65-17 season where the Rockets finished first in the Western Conference.
Heartbreak in a seven-game series loss to the Golden State Warriors kept the Rockets out of the 2018 NBA Finals. Harden, Paul and coach Mike D’Antoni were gearing up to make another run at the Warriors, a dynastic power that suddenly seemed very beatable. The summer of moves constructed by Morey and the front office did little to aggressively match with the Warriors’ style or improve Houston’s odds at conquering their foe.
Starter Trevor Ariza, 33 years old at the time free agency began in July, saw his $7.4 million contract expire. The Phoenix Suns offered Ariza a one-year, $15 million deal, and the Rockets did little to make a counteroffer, despite possessing his Bird Rights. Those Bird Rights would allow the Rockets to retain him without worrying about the salary cap. The Rockets declined to negotiate, and Ariza left for Phoenix. His replacements: Carmelo Anthony on the veteran’s minimum and James Ennis, who was coming off a moderately successful run with the Detroit Pistons.
Morey also traded away Ryan Anderson, a nearly 40% 3-point shooter, and second-round selection DeAnthony Melton for Marquese Chriss and Brandon Knight. A former lottery pick, Chriss was coming off two very poor seasons with the Suns. He shot only 30.9% from 3-point range and struggled to see minutes. That shooting disparity was a major downgrade from the 39% shooting from deep Anderson provided over the past two years in Houston. The offensive production of a catch-and-shoot threat of his caliber next to creators like Harden and Paul was vital to their offense.
Anderson was owed $41.7 over the next two years of his deal and had some defensive issues, particularly against the Warriors. But what the Rockets took back -- the project in Chriss and two years, $30.3 million remaining of Brandon Knight’s deal -- didn’t move the needle. Knight hadn’t played the entire previous season due to a knee injury and would slot behind Paul, Harden and Eric Gordon in the backcourt. Giving up a draft pick in Melton just to offload some salary reeked like luxury tax avoidance.
The Carmelo Anthony experiment did not work. He struggled to fit in with the Rockets, playing only ten games before being banished from the team. The Rockets spent $1.5 million -- the offset of his contract -- to trade him to the Bulls to get him off their books in January. By the time January 2019 rolled around, Ennis had been moved to backup duty. Both replacements for Ariza had flamed out quickly.
More moves ensued prior to the trade deadline. In February of 2019, Chriss, Knight, a 2019 first-round pick and two second-round picks were traded for Iman Shumpert, Nik Stauskas, Wade Baldwin and a future second-round selection. Ennis was shipped to Philadelphia for a future second-round pick. Baldwin, Stauskas and fringe NBA player Maarty Leunen were then traded to the Indiana Pacers for cash.
Over the course of six months, Morey had let Ariza walk, and turned Ryan Anderson, James Ennis, DeAnthony Melton and a 2019 first-round pick into Iman Shumpert and cash. Houston’s spending decreased drastically, though. They opened the 2018-19 season with $132.4 million committed to 11 players on guaranteed contracts. The Rockets were more than $11 million over the $123.73 million luxury line and facing a repeater tax penalty of $21.06 million as a result.
After the trade deadline passed, the Rockets owed their players only $122.1 million in salary, thereby ducking the luxury tax. Morey made a series of shrewd moves, though the seeds were setting in: the organizational priority was in cutting costs to avoid the daunted repeater tax, not winning a championship. The 2018-19 Rockets finished 53-29, twelve games worse than the season prior, and lost to the Warriors in six games during the Western Conference Semifinals.
Growing conflict between James Harden and Chris Paul led to some changes needing to be made. So Morey pulled the trigger on a major deal in June of 2019: shipping Paul and potentially four future first-round picks for Russell Westbrook. The Rockets, on-court, were banking on a younger Westbrook having more juice than Paul, and that the timelines would line up better with Harden’s. Both Westbrook and Harden played together during the earliest seasons of their career, hoping the chemistry they felt all those years ago as budding NBA players could carry over to their star days.
The tax savings period was done and repeater tax penalties were less daunting. It was time to leverage their future to try and win around their superstar scorer.
The Rockets locked in an extension on third guard Eric Gordon that summer for four years and $75.6 million. They brought in some lesser-priced veterans during free agency, and banked on the Westbrook and Harden pairing to lead their championship ascent.
A major cloud hung over the start of the 2019-20 season in Houston: the status of famed head coach Mike D’Antoni. D’Antoni, the lead man for the Rockets since 2016, propelled the franchise to 23 playoff wins in his first three seasons. Under D’Antoni’s watch, the Rockets made the Western Conference Semifinals for consecutive years for the first time since 1997 and the NBA Championship days of Hakeem Olajuwon and Clyde Drexler. D’Antoni, renowned for his offensive approach and emphasis on pace, continually innovated with the Rockets.
Defensively, the Rockets were never elite but had turned themselves into a competent group. D’Antoni worked well with associate head coach Jeff Bzdelik, who had been with him since taking over in Houston, on the defensive end. Bzdelik was let go by the Rockets in May of 2019, a move that was partially motivated by Bzdelik’s desire to spend more time at home. Bzdelik had retired the season before and come back to rejoin the Rockets organization in September of 2018. This time, the circumstances around his departure were less clear.
Down a trusted member of his staff and working for a new owner, D’Antoni entered the season as a lame-duck coach. Very rarely do head coaches work without the financial or job security of multiple years left on their contract. Providing that security allows the coach to make the right decisions for the team without having to worry about how they’ll be judged by their superiors. If the organization knows they won’t be working with the coach and renewing the deal, it would make little sense to delay bringing in the guy they want.
D’Antoni maintained that the contract was a “non-issue” heading into the season despite failed extension talks throughout the offseason. According to D’Antoni’s agent, the one-year extension offer the Rockets made “was for $2.5 million — which is $2 million below his current salary — but with another $2.5 million if D’Antoni made the playoffs and was still coaching the team at the end of the season.” Such an incentive and pay cut-driven structure is rare, especially for a coach who was one game away from the NBA Finals a mere 18 months prior.
Throughout the 2019-20 season, starting center Clint Capela battled a severely bruised heel that would keep him out of the lineup for games at a time. On January 29th, Capela exited a game against the Portland Trail Blazers after only 17 minutes. The Rockets would hold him out of the next three contests for precautionary reasons.
Before the trade deadline could offer reprieve and rest for Capela’s nagging injury, Morey made the decision to deal him to the Atlanta Hawks, along with veteran backup Nene, on February 5th. Also in the deal, Houston gave up Gerald Green and their 2020 first-round pick.
In return, the Rockets brought in Robert Covington and Jordan Bell from Minnesota. Covington, three years the elder of Capela, was a fascinating fit. Moving away Capela and not replacing him with a center meant the Rockets were leaning all the way into small-ball, putting Covington and PJ Tucker as primary options at the 5. The Rockets were experimenting with a new style in a way we had never seen before, a dangerous and risky proposition with such lofty championship expectations.
Unfortunately, COVID interruptions and injuries prevented us from seeing how the Rockets would fare in such a stylistic innovation. Houston went 8-6 after making the trade before the March 10th shutdown league-wide, then went 4-4 in the Disney bubble before the postseason began. A grueling seven-game series with the Oklahoma City Thunder in the first round of the 2020 playoffs saw the final three battles decided by three points or fewer.
While the Rockets were once again in the Western Conference Semifinals, a growing development regardless of their undersized roster was the flailing performance of Russell Westbrook. Their second superstar peaked in the regular season, averaging 27.2 points, 7.9 rebounds and 7.0 assists per game on 47.2% shooting. That includes a hot end to the year before the COVID postponement: from January 1st to March 10th, Russ averaged 31.7 points, 8.1 rebounds and 6.8 dimes on 52.7% shooting.
When the playoffs rolled around, Westbrook wasn’t the same. He missed four of their eight games in the regular season portion of the Disney bubble, as well as the first four games of the Thunder series with a quad injury. He finished the postseason averaging 17.9 points, 7.0 rebounds and 4.6 assists on 42.1% shooting, due in part to that injury and part to the effects COVID was having on their team.
During the bubble, Houston lost one of their more dependable role players in Danuel House, sent home by the team after a protocol infraction. The Rockets were left depleted of size and going head-to-head with the Los Angeles Lakers, one of the biggest and most physically imposing teams in the league.
A disappointing series against the Lakers capped off their season in disappointing fashion. Less than 48 hours after the Rockets were eliminated in a Game 5 blowout, D’Antoni was relieved of his duties.
The acquisition of Westbrook was predominantly driven by James Harden, wanting to reunite with his former Oklahoma City Thunder teammate inside the high-octane offensive system of D’Antoni. The Rockets paid a steep price to orchestrate the reunion, giving up four first-round picks in the process, and a fifth at the trade deadline to acquire Covington and build an immediate contender.
Despite the efforts on Harden’s part to bring Westbrook to town, the two did not mesh as either had hoped, both on-court and off-court. Westbrook, notoriously strong-willed and self-confident, struggled to adjust to an off-ball role. He also reportedly did not care for the culture in Houston that was fully built around Harden’s desires and was light on accountability. While D’Antoni and Morey may have contributed to that culture, the damage done on the Westbrook and Harden relationship wouldn’t be repaired simply by firing the coach.
Individually, Harden and Westbrook were foundational players on which any franchise can be built. Harden, an eight-time All-Star, three-time NBA scoring leader and former MVP, was signed through the 2023 season, making $131.9 million over the three remaining years of his contract. Westbrook, also a nine-time All-Star, three-time scoring leader and former MVP, was signed through the 2023 season and owed $132.6 million on his contract. Fertitta was set to pay this duo an average of $88.2 million per season, approximately 80% of the team’s salary cap. Fertitta’s organizational edict to cut costs in the midst of the pandemic stood in opposition to building a championship contender with their stars accounting for this much of the team’s cap.
With doubts about their cohesion and ability to win at play, the Rockets were in a bind. Watching their championship-driven team erode from within would leave them paying exorbitant salaries to star players who didn’t want to be together.
While grappling with those possibilities, general manager Daryl Morey announced he was stepping down due to personal reasons. Houston would have an entirely new organizational infrastructure, with a different GM and head coach on the sidelines. The trading of Russell Westbrook in early December to the Washington Wizards for John Wall sealed the deal on the overhaul of the major players surrounding Harden.
The overall theme of cutting corners for financial savings, the uncertainty around the health of John Wall and the suddenly aging roster were enough to rub Harden the wrong way. He had won in culture battles with other superstars like Paul and Westbrook, but now felt isolated and alone as a result of those victories. Morey and D’Antoni were gone. Six first-round picks had been traded in the last 18 months, including one with Westbrook to Washington for John Wall. The franchise traded four future picks and Hall of Famer Chris Paul, who brought the Oklahoma City Thunder to the Playoffs and battled the Rockets to the brink, to acquire Westbrook, then needed another to offload him a year later for a guard who hadn’t played in two years.
Whether the failure is attributed to Harden for the request, Morey for the execution or the entire organization for what it allowed culturally, a reset was necessary. The roster was old, and had no more future assets in the cupboard to include in trades that might improve the team. Their mastermind general manager was gone, and it was time to hire a new regime that could pick up the pieces.
Fertitta ultimately decided to hire Rafael Stone, the Rockets VP of Basketball Operations, as general manager. Stone was a loyal member of the Rockets for years, shrewd with words and garnering the reputation of a problem-solver. Stone brought in young Stephen Silas, a first-time head coach, to replace D’Antoni. Both hires would be unusual for a team with contending aspirations; typically, teams gearing up to make a championship run won’t hire first-time coaches and general managers to captain the ship.
Another indication the Rockets were starting to value their future over their present was seen in their approach to the 2020 NBA Draft. The Rockets made a big deal, essentially swapping Robert Covington (and his two years, $25 million remaining) for Christian Wood, a 2021 first-round pick and 2022 first-round pick. An incredibly shrewd maneuver in a vacuum, it became clear that winning a championship this year was no longer top priority.
Harden felt all these moves coming, and the walls were closing in around him. He requested a trade to the Brooklyn Nets in December 2020, held out of camp at the beginning of the year. In acts of defiance, Harden broke COVID protocols and didn’t report to the Rockets until December 8th. His trade request remained, and the Rockets were adamant they would not take a less-than-ideal return on the trade market just to offload their disgruntled star.
For Houston, such an approach made sense. They remained patient, and on January 13, 2021, they pulled the trigger on a deal to send Harden to Brooklyn. The trade helped the Rockets recoup many of the draft picks they lost in the Westbrook acquisitions, bringing in Brooklyn’s 2022, 2024 and 2026 first-rounders, as well as potential pick swaps in 2021, 2023, 2025 and 2027.
The expiring contract of Dante Exum and a 2022 first-rounder from Cleveland found their way to Houston, as did Pacers stud Victor Oladipo. A month later, Oladipo was sent to the Miami Heat for expiring contracts of Kelly Olynyk, Avery Bradley and a 2022 first-round pick.
Before the trade deadline, Stone continued the dismantling of their veteran pieces. PJ Tucker was traded to the Milwaukee Bucks (with a 2021 2nd round pick and 2022 1st round pick) for two first-rounders, DJ Augustin and DJ Wilson. Such a quick tear-down resulted in a whopping thirty players logging game minutes, the most ever during one NBA season.
The Rockets shed a great deal of long-term money that Winter, losing the three-year, $139 million Harden contract, taking on four first-rounders and $28 million in expiring deals in his place. The Rockets would still have to pay John Wall’s max contract and the Eric Gordon extension, but the other contracts around the edges were gone. They also turned PJ Tucker’s expiring deal into an additional first-round pick, and turned a second-rounder into intriguing young player Kevin Porter Jr. They found undrafted rookies Jae’Sean Tate, Kenyon Martin Jr. and Armoni Brooks, all of whom became rotation stalwarts by the end of the season with enough youth to get excited about.
The Rockets got positive contributions out of Wood and Porter, each of whom cemented themselves as positive pieces for the future. Still, the massive step back in talent from Harden and company left the Rockets 17-55, last place in the Western Conference and with the worst record in the NBA.
Stone’s first year on the job wouldn’t be judged by wins and losses, but ultimately his ability to reset the roster. In just a few months, the Rockets added a jarring eight future first-round picks and four future pick swaps, got value out of their expiring contracts, shed the long-term deals of James Harden and Robert Covington, and brought in several intriguing young pieces for their rebuild. Heading into the 2021 offseason, the table was fully set for the Rockets to engage in a full-scale rebuild, starting from scratch with the best lottery odds, three 2021 first-round picks and a fully stocked treasure trove of future assets.