The Town & Country Trust

has found itself in the middle of a three-way bidding war for its portfolio of apartments located on the East Coast.

The real estate investment trust already agreed in December to be bought out by a joint venture of

Morgan Stanley

(MS) - Get Report

and Onex Real Estate for $33.90 a share in cash, which represented a 13.8% premium over Town and Country's closing price at the time.

But on Thursday morning, a partnership consisting of

Essex Property Trust

(ESS) - Get Report

, UBS Wealth Management and AEW Capital submitted a definitive offer to buy Town & Country for $36 a share.

Later Thursday, a $37-a-share bid came in from Berkshire Property Advisors, a private Boston-based apartment owner.

Town & Country says it continues to support the Morgan Stanley deal.

The bidding war isn't surprising. Apartment REITs have been reporting solid operating results, and there were several REIT buyouts last year.

"Multifamily remains high on the radar screen to all sorts of investors, private and public, and the fundamentals of the business are early on in the sweet spot for that asset class," says Richard Anderson, an analyst with Harris Nesbitt.

Baltimore-based Town & Country owns a portfolio of 38 apartment communities in the mid-Atlantic and Florida. Most of the properties are older, with the exception of newer developments in Florida and Washington, D.C.

"The portfolio is older, but it is well-located," Anderson says. "A more aggressive operator could come in and earn a little bit more at the margin."

The bid by Essex, also a REIT, is a bit surprising since Essex only owns apartments on the West Coast.

Recently, many apartment properties have been changing hands at capitalization rates, or initial yields, as low as 3% or 4%. At $37 a share, Town and Country's portfolio is being valued at a 6.15% cap rate, according to Anderson's calculations. The Morgan Stanley bid represents a 6.5% cap rate, and the Essex bid stands at 6.25%, he says. To get those rates, Anderson says Town and Country's rental portfolio is spitting out $80 million of annualized net operating income.

It's not clear what happens next. Morgan Stanley and its partners have the right to match any higher offers before Town & Country can change its mind about the deal. The deadline for such a move is three days from Thursday, according to a person familiar with the situation.

The Essex bid expires at 1 p.m. EST Wednesday. The offer is definitive, and Essex and its partners have agreed to pay the $20 million breakup fee to Morgan Stanley if they win.

The Berkshire bid is being coined a "proposal" and not a definitive offer. Berkshire says it will submit a formal offer within 21 days of beginning due diligence.

All bids also include pro-rata payments of Town & Country's dividends, which explains why the company's shares were trading above $37 after Essex's $36 bid was announced.

Town & Country shares closed Thursday at $38.64, up 5%, or $1.88.