Dream Hotel project faces $80 million cost overrun, prompting possible city legal review

The Dream Hotel development near the Palm Springs Convention Center faces an $80 million cost overrun that has prompted the developer to request a suspension of city plan reviews while officials consider legal remedies and residents voice concerns about long-term impacts.

Mayor Ron deHarte announced Wednesday in an email to residents that the developer, Lauri Kibby of Selene Palm Springs, LLC, has informed the city that construction estimates now exceed their budget by approximately $80 million, bringing total costs well above the original $250 million target. Kibby attributed the increase to tariff fluctuations, global political upheaval and supply chain uncertainties.

Kibby has requested that the city put plan review on hold to undertake a “value engineering” process aimed at reducing project components to meet the project’s $250 million budget. Construction at the project site, 450 South Calle Alvarado, could potentially restart in the fourth quarter of this year after any adjustments are implemented by the architectural team, according to deHarte.

An amendment to the city’s agreement on the project received unanimous City Council approval in June 2023 after Kibby’s team quickly redesigned portions of the development to address neighbor concerns about building heights. The project, originally proposed as a 200-room hotel and 143 residences, is currently designed for 155 hotel rooms and 89 condos and townhomes. Some work had been completed at the site previously, but construction was halted due to the pandemic and a legal battle with a contractor.

City officials and Kibby celebrated a ceremonial groundbreaking for the project in December 2024. At the ceremony, optimism was expressed about a 2027 opening date.

At the time of the ceremony, however, multiple deadlines from the latest development agreement had already passed, including requirements to commence site grading by August 2023 and begin hotel construction by September 2024.

In his email, deHarte said the city is actively reviewing the development agreement and considering several contractual remedies. They may include requesting updated evidence of the developer’s financing, reviewing the current schedule of performance for delays, evaluating whether other conditions can realistically be met, and potentially reviewing the ownership structure of Kibby’s LLC.

“The city is currently considering holding a meeting with our legal counsel to discuss the best path forward,” deHarte said in his email.

In a reply to deHarte’s email, one resident who lives at The Morrison development, located about half a block from the Dream Hotel site, expressed concerns about the potential for a multi-year shutdown and called for improved site aesthetics during any extended delay.

That resident said removing $80 million from a $250 million project would likely require significant recasting and new approvals, describing the current chain-link fencing with multiple signs as “unacceptable” and suggesting the city require proper wooden barriers while the project remains stalled.

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