there is certainly a tension between the bank and the developer/owner over potential default, but the mechanism isn't simply the developer/owner presenting fina

there is certainly a tension between the bank and the developer/owner over potential default, but the mechanism isn't simply the developer/owner presenting financial projections and bankers being relegated to only accepting their word and being stuck with a bankruptcy ultimatum if the deal goes sour. commercial appraisers must validate the assumptions and calculations based on prevailing conditions and comps. the question is really who should take the risk of getting the projections wrong, and the answer is straightforwardly the bank, although the developer/owner has to act in good faith in both the financing and the operations. a new development is basically a finite business, and projecting the cash flows, and therefore the ultimate valuation, is risky. loan officers' principal job is to assess (and accept/reject) that risk. all that said, we need to stop propping up banks and loans gone bad. without real downside consequences, we get misallocation, as we plainly see in many commercial real estate markets.