Bill Moss says sweeping changes are needed in the real estate investment trust industry, saying it is beset by conflicts of interest and bloated fees.

Moss, who spent 23 years building Macquarie Group Ltd. into an international investment bank and is now chairman of Moss Capital Ltd., says Australia’s $77.9 billion REIT industry was riding an unsustainable “gravy train”.

“The industry is a boiling frog,” he says. “If you put a frog in cold water and slowly heat the water until it boils the frog won’t jump out of the boiling water. It will die. The industry is so comfortable in its own environment. It’s a club. But they’re scared. Are they perpetuating a gravy train for themselves?”

Moss says while wages have fallen, REIT management fees are similar to levels at the apex of the bull market.

“The industry is over-bloated and over-paid,” he says. “If the industry wants a future it needs to clean up its corporate governance, its fee structure and needs to create a model that is desired by all asset classes.”

Advisers to superannuation funds often proclaim Australian commercial property prices are rising, says Moss. But REITs are now largely trading at a discount to their net asset value. Moss doesn’t plan to invest in Australian REITs.

Moss says REITs should return money to their unit holders. New REITs should be created that trade at their net asset values, he says. Moss failed last month to become the manager of REIT Charter Hall Group.