The District government has offered developer Oliver T. Carr, Jr. nearly $1.2 million in grants and tax abatements to preserve part of the facade of the landmark Albee-Keith Theatre at 15th and G streets NW.

But the developer, apparently rejecting the offer, told the city that demolition of the building will proceed. The Carr company already has demolished the rear and about half of the G Street facade of the building.

In a protracted court battle, preservationists and city officials have tried to win the developer's agreement to incorporate the rest of the facade into a planned $60-million shopping mall and office complex. Carr has indicated to city officials that this part of the facade will be demolished beginning next week.

"We don't feel that what we've been offered at this point is any kind of commitment," said Betts Abel, project manager for the Carr company. "We can't afford to delay further."

The city's offer, announced Friday, consisted of about $800,000 in a special grant being sought from the U.S. Department of the Interior, $125,000 in District preservation funds and tax abatements amounting to about $250,000. The tax benefits would have to be approved by the City Council.

Although subject to City Council approval, the city also offered to mbet the Carr company's request to close an alley in the block where the proposed development is to be located and to allow Carr to build to a height of 130 feet. Without a special exemption by the city, Carr would be allowed to build only a 95-foot building facing 15th Street.

The city's offer was made after about two months of negotiations with Carr officials, the result of a legal suit brought by Don't Tear It Down, a local preservation group.