Of course you're right in a sense, Hamlin: every stock represents a share of equity in an actively managed company, just as every corporate bond represents a share of debt held by an actively managed company. (For that matter, every government bond represents a share of debt held by an actively management government entity!)
In this context, though, "passive" refers to an index mutual fund portfolio of investments in equity REITs, with holdings determined by the market cap of each REIT as a share of the overall industry rather than by active decision-making. My point is that it does not require superior stock-picking in exchange-traded equity REITs to generate better returns than from the portfolios of properties carefully constructed by institutional investors, or by private equity real estate investment funds for the "benefit" of institutional investors.
Incidentally, the "active management fees" charged by exchange-traded equity REITs--also known as G&A--are already reflected in "gross" returns. The phrase "active management fees" generally refers to investment management costs that are then subtracted from those "gross" returns.