New Hearing Date Set for Leases for Dec 30th – 12-04-08

On November 28, 2008, DBSI, Inc. and its affiliated chapter 11 debtors (collectively, “DBSI”) filed its Amended Notice of Revised Objection Deadline and Hearing Date [Docket No. 335] (the “Notice”). At the request of the Official Committee of Unsecured Creditors and numerous parties in interest, and to provide parties in interest with additional time to address the implications of DBSI’s motions to reject Masterleases and explore alternatives in connection therewith, DBSI adjourned the hearing on the First, Second and Third Rejection Motions [Docket Nos. 31, 63 and 88] to December 30, 2008 at 11:00 a.m. (ET) (the “Hearing”).

Because DBSI is prepared to proceed with rejection of all Masterleases and have “silo’d” the cash flow for each DBSI Masterlessee, DBSI is seeking Bankruptcy Court approval of the rejection of the Masterleases to be deemed effective as of:

* November 12, 2008 for Masterleases and Subleases identified on Exhibits 1-A through 1-D to the Notice (Masterleases and Subleases covered by First Rejection Motion);

* November 14, 2008 for Masterleases identified on Exhibit 2 to the Notice (Masterleases covered by Second Rejection Motion); and

* December 2, 2008 for Masterleases identified on Exhibits 3 or 4 to the Notice.

Notwithstanding the foregoing, in the interim period prior to the Hearing DBSI will continue to entertain the following alternatives to the rejection of a Masterlease:

* execution of an Administrative Waiver by the requisite representatives of the TIC Investors;

* execution of an Amended and Restated Lease Agreement; and

* execution of an Assumption and Assignment of Lease and Subleases.

A full copy of the Notice along with the Exhibits may be obtained on the website of the Debtors’ noticing and claims agent at www.kccllc.net/dbsi (click the link for “Court Documents” and then the link for the Notice).

DB02:7607478.1
067799.1001

Delayed Hearing Notice - 11-28-2008

The following is an important message from Stephen Burr, counsel for DBSI, and is intended only for Tenant-in-Common owners who are not represented by counsel.

The attorneys representing groups of Tenant-in-Common owners (TICs) and the Creditors Committee have made it clear that they require more time to deal with the decisions which would otherwise have to be made by the TICs by December 2, 2008. In response to these requests, we have decided to change the subject matter of the December 2nd hearing, and defer the rejection/amendment/assignment Lease issue until a hearing now scheduled for December 30, 2008. We encourage you to continue the decision making process prior to December 2nd, particularly as to the waiver of administrative claim, as there is some risk that the Judge will not allow us the additional time. However, it seems likely that the Judge will grant our request. What we will be asking the Court to do the following on December 2nd:

1. As to properties that have special purpose entities as master lessees (i.e., not DBSI Housing or DBSI Master Leaseco) our request will simply be to delay the hearing until December 30th; and

2. As to the remaining properties that have DBSI Housing or DBSI Master Leaseco as master lessee, we will change our motion to a Nunc Pro Tunc motion (i.e. a motion to take an action effective as of a certain date but not operative until a subsequent hearing ).

The December 2nd hearing will remain on the schedule to deal with other pending issues. A formal notice regarding the December 2nd hearing and a list of changes should be available soon.

Depending on how the cash motions come out, we will make every effort to pay critical operating expenses and debt service in December to the extent of cash coming into the operating accounts on the individual properties.

Additional information regarding the Chapter 11 Bankruptcy can be found here:

http://www.kccllc.net/dbsi

DBSI’s Authority to Use Cash Collateral on an Interim Basis 11-18-08

On November 14, 2008, the Bankruptcy Court presiding over the chapter 11 bankruptcy cases of DBSI and its affiliated chapter 11 debtors (collectively, “DBSI”) approved the Interim Order (I) Authorizing Debtors’ Limited Use of Cash Collateral, (II) Granting Adequate Protection to Certain Purportedly Secured Parties During the Interim Period, and (III) Scheduling Final Hearing Pursuant to Bankruptcy Rule 4001 [Docket No. 54] (the “Interim Order”). The Interim Order allows DBSI use of cash on an interim basis subject to the per-property budgets attached to the Interim Order. DBSI’s use of cash was approved by the Bankruptcy Court over the objections of several TIC investors following hearings on November 12th and 14th. As set forth in the Interim Order and according to the budgets attached thereto, DBSI will continue to “silo” cash to be utilized on a per-property basis on an interim basis, subject to the Court-approved use of certain fees apportioned among all of the DBSI chapter 11 entities. The next hearing to consider further use of cash is scheduled for December 2, 2008 in Wilmington, Delaware.