If the gap between listed REITs and private marks closes, which side moves, and does sizing depend on the answer

The convergence thesis gets carried around for months at a time without anyone specifying how it actually resolves. There are at least three paths and they are not the same trade. Path one, listed prices re-rate up toward private marks. That is the version people mean when they say REITs are cheap. The sleeve appreciates, the yield on new money falls, and every month spent waiting costs something. Path two, private marks come down toward the listed price. Appraisal-based valuations grind lower, funds report weaker numbers, and the gap closes without listed shares doing much of anything. The dividend still gets collected, which is most of the return in that scenario, and the entry price stops looking like a bargain in hindsight because it was fair all along. Path three, they meet somewhere in between over three or four years, with rate expectations shoving both around in the meantime. The sizing question follows from which one you believe. If path two is meaningfully likely, the sleeve should be sized as an income position with modest appreciation, and payout coverage and debt maturities are what matter most. If path one, the sleeve is a re-rating bet, which argues for tilting hard into the sectors with the tightest supply picture and accepting the volatility that comes with concentration. Those are different portfolios built from the same thesis. Most write-ups skip straight to path one without ever arguing for it.