UPDATE 1-Federal Realty Q4 FFO tops Street, sees weak 2009

* Q4 FFO beats Street view by 2 cents

* Projects FY09 below market estimates

* Q4 FFO helped by increase in contractual rental rates

Feb 18 (Reuters) - Federal Realty Investment Trust (FRT.N) posted better-than-expected quarterly funds from operations (FFO), helped by higher average contractual rental rates, but forecast fiscal 2009 FFO below Wall Street estimates.

The retail-focussed REIT holds a high-quality portfolio, spread across prime locales, including Washington D.C. and California, which largely screens it from the downturn affecting REITs.

For 2009, it sees FFO of between $3.80 a share and $3.92 a share, below consensus estimates of $3.94 a share, according to Reuters Estimates.

"The retail landscape has clearly continued to deteriorate in 2009, making predictions about the near future particularly difficult," said CEO Donald Wood.

For the fourth-quarter, Federal Realty reported FFO of $58.8 million, or 99 cents a share, compared with 92 cents a share a year earlier.

Excluding a $1.6 million charge related to a litigation, quarterly FFO was $1.02 a share, above market expectations of $1.00 a share, according to Reuters Estimates.

However, overall portfolio leased as of Dec 31 was down marginally at 95 percent, compared with 95.5 percent in the last sequential quarter ended Sept 30.

In a statement, the REIT said, it leased 330,000 square feet at an average cash-basis contractual rent increase per square foot of 13 percent.

"The average contractual rent on this comparable space for the first year of the new lease is $21.62 per square foot compared to the average contractual rent of $19.18 per square foot for the last year of the prior lease," it said.

Shares of Federal Realty closed down 2 percent at $42.57, Wednesday on the New York Stock Exchange. (Reporting by Biswarup Gooptu in Bangalore; Editing by Saumyadeb Chakrabarty)