Northrop Grumman SCIF & Lab Facility DST Overview
Northrop Grumman SCIF & Lab Facility DST (offered of record as SE NG (Gilbert), DST) is a Delaware statutory trust sponsored by SE NG (Gilbert) Sponsor, LLC, an affiliate of Chicago-based Syndicated Equities Group, LLC. The Trust was formed to acquire and hold a single, newly constructed, two-story, approximately 119,180-square-foot Class A building at 1655 West Elliot Road in Gilbert, Arizona, within the Phoenix metropolitan area. Developed between 2022 and 2024 as a build-to-suit, the property sits on roughly 9.4 acres with 289 parking spaces and forms part of Northrop Grumman's satellite manufacturing campus in the Gilbert Spectrum Business Park. Approximately half of the building is dedicated to sensitive compartmented information facilities (SCIF) constructed to the federal government's ICD 705 / TEMPEST security standards, with the balance comprising specialized laboratory space (roughly 6,000 square feet, engineered for future conversion to ISO-rated clean rooms), Class A offices for senior personnel, and a Northrop Grumman employee credit union in the lobby. The property is 100% net leased to Northrop Grumman Systems Corporation, a wholly owned subsidiary of Northrop Grumman Corporation (NYSE: NOC), under a 12-year primary lease that commenced January 15, 2025 and expires January 31, 2037, carrying approximately 3% annual rent escalations and three five-year renewal options. The offering raises up to $27,855,000 of investor equity through 5,571 interests priced at $5,000 each, alongside an approximately $33,676,800 non-recourse first mortgage, funding total capitalization of $61,531,800 against a $56,128,000 purchase price. The DST structure is designed for accredited investors, and in particular Section 1031 and 1033 exchange investors seeking to defer capital gains by acquiring a fractional beneficial interest treated as direct ownership of the underlying real estate. The minimum investment is $100,000 for 1031 investors and $25,000 for non-1031 investors, and distributions are expected to be paid quarterly. As a passive, single-tenant, net-leased, investment-grade credit-tenant offering with no day-to-day landlord management burden, it is intended for investors willing to exchange active control and liquidity for a professionally administered, mission-critical defense-sector asset held for the balance of a defined term.
Highlights
Location and market. The property occupies a strategic position in the Phoenix MSA within the Gilbert Spectrum Business Park, an approximately 850,000-square-foot park anchored by Northrop Grumman's Satellite Manufacturing Facility. Northrop Grumman occupies five buildings totaling roughly 655,000 square feet at the site and is in early planning for a potential sixth, underscoring the campus's long-term importance to the tenant. Gilbert ranks as the nation's fourth-largest aerospace market with a STEM-focused workforce, and Northrop Grumman alone employs about 4,200 people in Arizona while contributing roughly $5 billion to the state economy annually; the U.S. Department of Defense awarded $14.5 billion in contracts to Arizona companies in 2023. The site sits at McQueen and Elliot Roads (57,000+ vehicles per day) with strong access via US 60, Loop 101 and Loop 202, about 16 miles from Phoenix Sky Harbor International Airport. The surrounding Chandler office submarket recorded roughly 566,000 square feet of positive net absorption over the prior year, with vacancy improving to about 15.3% and no new office construction underway, supporting supply discipline in the broader area.
Property quality, specialized build-out and tenancy. The building is a newly constructed (2022-2024) Class A asset purpose-built to meet Northrop Grumman's need for secure SCIF space handling classified U.S. government material for its Space division. Approximately 50% of the building is SCIF constructed to the most rigorous ICD 705 / TEMPEST standards, incorporating conductive enclosures, shielded cabling, power-line filtering and honeycomb steel panels; roughly 6,000 square feet of laboratory space is engineered for future ISO-rated clean room conversion. Approximately $34 million was invested in the interior build-out, of which Northrop Grumman contributed roughly $24 million of its own capital, chiefly for the SCIF spaces. That level of tenant-funded, single-purpose investment, combined with rising SCIF construction costs ($350-$1,000 per square foot) and development timelines stretching up to 36 months, supports the sponsor's view that the tenant is likely to remain in place long term. A June 2026 Property Condition Report rated the building in good condition (the highest rating) with no material immediate capital repairs, and a Phase I environmental assessment found no recognized environmental conditions. The tenant handles day-to-day management, so there is no third-party property manager expense borne by the Trust.
Financing and capital structure. The acquisition is financed with an approximately $33,676,800 non-recourse first mortgage from Old National Bank (or another commercial lender), representing about 55% of the Trust's total investment and roughly 60% of the property's purchase price. The interest rate is expected to be synthetically fixed through an interest rate swap at one-month SOFR plus a 200-basis-point spread; as of late June 2026 the rate was projected at approximately 6.29%, with the sponsor's forecasts assuming 6.36% and an indicative 10-year all-in swap rate of 6.41%. The loan carries a 10-year term with interest-only payments for the first 36 months, followed by amortization on a 30-year schedule, and a minimum debt service coverage ratio of 1.25 to 1.0. Beginning 24 months before maturity, a full cash-flow sweep funds a $5 million reserve unless the tenant elects to renew, in which event the swept funds are released back to the Trust. Importantly, the loan is non-recourse to investors, who are not required to guarantee it; the sponsor or its affiliates provide the standard non-recourse carve-out and environmental guaranties. The interest-only period is intended to support distributable cash flow in the early years of the hold.
Sponsor and management. The offering is sponsored by an affiliate of Syndicated Equities Group, LLC, a national real estate investment firm founded in 1986 that owns, operates and asset-manages property on behalf of its investors across office, medical office, retail, industrial, multifamily, hotel, parking and other sectors. Over the prior decade, Syndicated Equities has acquired or invested in more than 80 properties, and since 2000 it has completed more than 100 transactions serving Section 1031 exchange buyers and other accredited investors. The sponsor is led by Richard Kaplan, founder and president, who has been active in Chicago and national real estate for more than 50 years and identified the net-lease 1031 niche while completing his own exchange in 1997; Managing Partner Matthew McCulloch, who leads evaluation, structuring and financing of acquisitions; and Managing Partner and COO Jason Schwartz, who oversees financial modeling, capital structuring and investor relations and has been involved in more than $300 million of commercial acquisitions. The affiliated Asset Manager, SE NG (Gilbert) AM, LLC, will handle lease enforcement, reserves, reporting and disposition strategy. The offering is distributed through Metropolitan Capital Investment Banc, a FINRA/SIPC member broker-dealer.
Tax treatment and exit. The Trust is structured as a Delaware statutory trust intended to qualify as a grantor (investment) trust under IRS Revenue Ruling 2004-86, so that each investor is treated as owning a direct interest in the underlying real property for Section 1031 purposes. This allows investors selling appreciated business or investment real estate to defer federal capital gains and depreciation-recapture tax by exchanging into the Trust, while continuing to receive depreciation deductions based on their basis and quarterly cash distributions from the net-leased asset. A properly held interest can also receive a step-up in basis at death under current law, and non-1031 investors may participate for current income and potential appreciation. The sponsor has obtained a supporting tax opinion from its counsel (though investors may not rely on it and must consult their own advisors). The planned exit is a sale of the property, generally in advance of loan maturity because the DST cannot refinance; on that sale, a qualifying investor may again pursue a Section 1031 exchange. Investors should note the offering does not describe a UPREIT/Section 721 exchange option into a REIT, and that a forced conversion to a Successor LLC under 'Exigent Circumstances' would end 1031 eligibility on a later sale.
Analysis of Northrop Grumman SCIF & Lab Facility DST
Insights
Underwrite this as a defense-sector credit bond in a real-estate wrapper: buyers are financing Northrop Grumman's rent check on a purpose-built SCIF campus, not a call on the Gilbert office market. The lease is 100% net to a Northrop Grumman subsidiary through January 2037 with ~3% annual bumps, so income is contractual, and ~$24M of tenant-funded SCIF build-out makes a mid-term departure costly. On relative value the income is rich for investment-grade-anchored risk: a 5.30% Year-1 distribution rises to a 6.1% average and a 7.80% Year-10 peak, and the deal screens Above Average versus the benchmark on income, peak, and growth. The offset is entry cost: a 17.4% total load is heavy, well past the 9% line - broker-dealer and sponsor acquisition/disposition fees on a net lease with little to manage, so the asset must appreciate to recover day-one dilution. Year-1 payout is covered by net rent, not return of capital, but only because the first 36 months are interest-only - the tell. The crux is the exit: a DST cannot refinance, so this single-purpose, thin-comp building sells into the cap-rate and defense-sentiment backdrop at maturity, and return rides on that print and on the tenant renewing before the 24-month cash-flow sweep bites. What the tidy "6.1% average" hides is the shape: distributions dip to 5.00% in Year 4 as interest-only rolls off and amortization begins, then recover only on rent escalations - the early yield is engineered, not organic. The sponsor's 79 full-cycle deals average just a 1.36x equity multiple, so don't bank on appreciation to rescue the load. Verdict: own it as a 1031 exchanger with gains to shelter who wants passive, credit-anchored income for a defined term and can accept illiquidity, single-tenant concentration and defense-policy risk; pass if you want diversification, appreciation, or a 721/UPREIT or early exit; none exists here.
Advantages
Investment-grade, mission-critical tenancy. The building is 100% net leased to Northrop Grumman Systems Corporation, a subsidiary of Northrop Grumman Corporation (NYSE: NOC), which carries a BBB+ investment-grade rating and reported roughly $42 billion of fiscal 2025 revenue and a record $95.7 billion backlog. The lease runs through January 31, 2037 with approximately 3% annual escalations (base rent rising from about $3.65 million to about $4.90 million) and three five-year renewal options. Strong tenant commitment: Northrop Grumman invested roughly $24 million of its own capital in the specialized SCIF build-out, and the highly secure, single-purpose nature of the space, along with rising SCIF construction costs and multi-year build timelines, makes relocation costly and supports long-term occupancy. Truly passive, net-leased income: the tenant handles day-to-day management, operating expenses, utilities and taxes, so the Trust bears no third-party property management cost, and distributions are expected quarterly. Moderate, non-recourse leverage: at roughly 55% of total investment (about 60% of purchase price) with a 10-year loan, a 36-month interest-only period and a 1.25x minimum DSCR, investors are not required to guarantee the debt. Attractive market fundamentals: a Phoenix-MSA aerospace hub with deep defense employment, an improving Chandler submarket, limited new supply, and rent about $3 per square foot below Class A market asking rents, providing some cushion at renewal. Clean diligence: a June 2026 Property Condition Report rated the asset in good condition and the Phase I environmental report found no recognized environmental conditions. Tax efficiency: the DST is designed for Section 1031/1033 deferral, ongoing depreciation, and a potential further exchange at sale, backed by an experienced sponsor with 100-plus 1031 transactions completed since 2000.
Concerns
Single-tenant concentration and no diversification. All Trust income depends on one tenant in one building; a default, non-renewal or bankruptcy would eliminate rental income until a replacement is found, and the highly specialized SCIF/lab build-out may be difficult and costly to re-lease or retrofit for another user, reducing residual value. Parent does not guarantee the lease: the obligor is Northrop Grumman Systems Corporation, not the publicly traded parent, so investors rely on the subsidiary's performance. Government-contract dependence: the tenant's revenue is concentrated in U.S. defense contracts subject to annual appropriations, continuing resolutions, shutdowns, sequestration, 'termination for convenience,' shifting procurement priorities, and announced Air Force/Space Force spending cuts (the PPM cites roughly $2.3 billion in 2026 DOGE-driven cuts). Illiquidity and no control: there is no public market for the interests, they may have to be held indefinitely, investors have no voting rights or management authority, and the Discretionary Trustee can be removed only by holders of two-thirds of the interests and only for adjudicated fraud, gross negligence or willful misconduct. Leverage and refinancing risk: loan payments are due regardless of rent, a tenant default cross-defaults the loan, the DST cannot refinance (likely forcing a sale, possibly at an unfavorable time), and prepayment triggers a penalty and swap breakage fee. Fees and dilution: substantial up-front load, including a 2.75% acquisition fee, 2.75% due diligence/underwriting fee, 2.80% loan placement/guaranty fee, a 3.00% disposition fee and a 0.35% annual administrative fee, none negotiated at arm's length, causes immediate dilution so the property must appreciate meaningfully just to return invested capital. Reliance on a newly formed sponsor: the Sponsor, Asset Manager and Discretionary Trustee are newly formed entities with limited resources, and the loan, trust and asset-management documents are not yet finalized and may change materially. Execution/timing: the interest rate is not locked until closing, tenant employees were not scheduled to occupy until August 2026 (occupancy is not a lease requirement), and the Trust cannot raise additional capital without converting entities. Tax risk: 1031 treatment depends on Revenue Ruling 2004-86 assumptions that differ in some respects here, a portion of proceeds may be treated as taxable 'boot,' IRA/tax-exempt investors will likely incur UBTI on the debt-financed portion, and an 'Exigent Circumstances' conversion to an LLC would forfeit 1031 eligibility on a later sale.
Northrop Grumman SCIF & Lab Facility DST — Complete Offering Data
Offering & Structure
Investment NameNorthrop Grumman SCIF & Lab Facility DST
SponsorSyndicated Equities
StructureDelaware Statutory Trust (DST)
Offering Type506(c)
StatusClosed
Last Updated2026-07-14
Size & Availability
Total Offering$61,531,800
Equity$27,855,000
Debt$33,676,800
Available Equity$27,855,000 (0% of equity)
Minimum Investment$100,000
Total Load17.40%
Initial Reserves0.91%
Property
Property TypeOffice
StrategyCore
LocationAZ
Market TierTier 1
Income & Projections
Average Yield6.12%
Projected Yields (Y1–Y10)Y1 5.30% · Y2 5.49% · Y3 5.90% · Y4 5.00% · Y5 5.43% · Y6 5.88% · Y7 6.34% · Y8 6.81% · Y9 7.30% · Y10 7.80%
Tax-Adjusted Yield12.14%
Cap Rate Equivalent8.98%
Financing
In-Place LTV54.73% LTV
LenderOld National Bank
Loan TypeFixed
Interest Rate6.36% (Fixed)
Loan Term10 years
I/O Period3 years
Amortization30 years
Y1 DSCR1.71x
Exit
Estimated Hold Period10 years
721 Exchange ExitNone
Benchmarks (vs sector median)
Avg. Income6.12% vs 3.09% market — Above Average
Growth47.17% vs 27.04% market — Above Average
Peak7.80% vs 3.64% market — Above Average
Every data point Baker 1031 tracks for this offering, in one place. Figures are drawn from the offering’s private placement memorandum and sponsor materials unless noted, are summaries for convenience only, and are qualified in their entirety by the PPM. Tap the ⓘ icon next to any label for what it means and how it is calculated.
