Breaking Down the Cory Luebke Extension

Cory Luebke has just become the most recent Padre to get long-term security.  Cameron Maybin was first.  Nick Hundley was second.  Now, the Padres and Luebke have agreed on a four-year, $12 million guaranteed contract.  The deal also includes a club option for 2015 and 2016.  The 2016 option would be worth $7.5 million, and the 2017 option would be worth an even $10 million.

This contract falls in line with some of the best we’ve seen in recent years.  Organizations like Tampa Bay and Boston have really set the standard for long-term extensions, and this deal mirrors some from those organizations.  Tampa Bay has made it a priority to lock-up their young talent.  They also make it a priority to include club options in those deals.  Rarely are the options mutual.  This is exactly what the Padres have done with Luebke.  They essentially have bought out all of his arbitration eligible years and, if the two club options are picked up, one year of free agency.

The biggest difference between Luebke’s deal and those we’ve seen in other trend-setting organizations is Luebke’s age.  He is 27 years old.  Most of these deals are done with players in their early 20’s.  For example, Cameron Maybin is just 24 years old.  Matt Moore, who the Rays just locked up last season, is just 22 years old.  Luebke, though, just recently got his first shot at the bigs.  As you will read in just about every article, he is a late bloomer.

Last season was Luebke’s first full season at the major league level.  He pitched in 46 games, starting 17 of them.  He finished the season with an ERA of 3.29 and an FIP of just 2.93.  In 2010, Luebke made his major league debut on September 3rd.  He didn’t see much time with the big league club.  In a limited sample size, Luebke had a 4.08 ERA in 2010.  But beyond his face-value numbers, the Padres see potential.

Luebke’s best trait may be the fact that he’s left-handed.  The Padres have had Clayton Richard as their go-to left hander for a number of years now.  However, they’ve been lacking a left-handed ace.  While most don’t see Luebke taking on the ace role overall (and not many think the Padres actually have an ace), he can certainly be the Padres left-handed ace.*

*I am not one of those who thinks the Padres lack an ace or that Luebke can’t be an ace.  In fact, I’ve already written that Luebke has the makings of being the Padres future number one starter.  

I’ll leave the projections to a minimum for now and focus instead on the contract.  The first thing to understand is the probable salaries Luebke would have earned in each of his arbitration years.  It’s too early in Luebke’s career, and he’s too far away from arbitration, for there to be accurate projections out there.  However, we can look at similar pitchers and what they’ve been worth.  Phil Coke, Clayton Richard, and Jason Vargas are the comps we’ll use.  Each is a left-handed pitcher, is a starter or has started games, and each has gone through arbitration or been offered a contract to avoid arbitration.

Phil Coke and the Tigers have avoided his first arbitration eligible year with a $1.10 million contract.  He is just 22 years old and has just recently converted – or been given the opportunity – to start.  He started 14 games last season.  That was year-one of arbitration eligibility.

For a second year arbitration contract, we’ll turn our attention to Clayton Richard.  In his second year of arbitration eligibility, the Padres offered Richard a contract worth $2.75 million.  Richard was just 5-9 last season but carried a 3.88 ERA.

Finally, Jason Vargas just recently avoided his third year of arbitration eligibility.  The Mariners gave him a $4.85 million dollar deal.  Vargas has never had an ERA under 3.78.  He’s entering his seventh year of major league play.

So there you have it.  A first year arbitration eligible player received $1.10 million, a second year arbitration eligible player received $2.75 million, and a third year arbitration eligible player received $4.85 million.  How does that translate to Cory Luebke?

Luebke is not even arbitration eligible until 2014, so for 2012 and 2013 he will be paid somewhere around $1 million combined.  If we use numbers similar to our player comps, Luebke may be worth somewhere around $1.1-1.2 million in 2014, his first arbitration-eligible year.  In his second year, depending on performance, he could be worth up to $3 million.  In 2016, his third year of arbitration eligibility, Luebke could earn near $5 million.  2017 will be his first year of free agency and we’ll cover that in a minute.

So, all combined Luebke could make an estimated $10.2 million (give or take) between now and 2016 if the contract extension was never done.  The contract extension will pay him $12 million for four years (through 2015).  The 2016 option due to Luebke if the Padres pick it up will be worth $7.5 million.  As we already mentioned, his third year of arbitration eligibility could pay him around $5 million.

So far, if you’re following along – and I understand if you’re not, Luebke is getting the better end on this deal.  Assuming my projections are anywhere close to accurate, the Padres will overpay Luebke by $9.5 million through 2016.  But what about 2017, Luebke’s first year of free agency?

Free agency contracts are slightly easier to predict because we have a formula that works well.  Basically ever win above replacement a player is worth equals $5 million in free agency dollars.  Of course, it’s not an exact science, but it helps in predicting and analyzing contracts.  Luebke was worth 1.8 WAR last season or $9 million based free agent contract value.

Luebke figures to be a 2-3 WAR pitcher going forward as he gains more experience.  He could be worth even more, but for simplicity sake, we’ll work off the notion that he will be worth 2.5 WAR in 2017.  That would be a contract worth approximately $12.5 million on the free agent market.  The Padres will be paying him $10 million in 2017 if they pick up the club option.  Advantage Padres.

Overall, the advantage the Padres will see in buying out Luebke’s free agent year in 2017 does not outweigh the overpayment they will make on his arbitration-eligible years.  However, my projections are conservative.  None of the players I used as comps for the arbitration salary projections are stars.  Luebke could develop into a star.  He could develop into a consistent 4-5 WAR pitcher.  If that happens, the Padres will be looking at a huge bargain with the deal they just made.

In all, I like the contract extension.  On face value, will limited info in which to project Luebke’s future, it seems the Padres may have overpaid.  Yet, Luebke is on a path that could lead him into an ace role.  In that role, if Luebke performs like an ace, he will be worth far more than I estimated.  The bottom line for now is that the Padres have locked up another one of their young players to a long-term contract.  Could be team friendly, or it could be an overpayment.  Only time will tell.

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What do you think of the Cory Luebke contract extension?