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Michael and his haggard crew of addicts know they won’t last much longer as residents of the People’s Drug Store warehouse on 77 P St. NE. Years ago, they carved out makeshift apartments for themselves on the first floor of the structure, which stands just a stone’s throw from the busy intersection of Florida and New York Avenues. The squatters’ quarters are stocked with blankets, garbage bags, and clothing. Stacks of shoes and magazines line a shower stall. Neat rows of refurbished lighting fixtures sit under a conveyor belt. Beds are laid out in the dark corners.

Last February, a construction supervisor working on the renovation of the warehouse site discovered the community that Michael and his housemates had spawned. The first thing he noticed was a row of pigeon skeletons dangling from the windows by their feet. He did his best to shoo away the squatters and even had a couple busted for trespassing.

Michael, who refuses to give his last name, says he didn’t really take the hint. “The police kept coming in every day, every day,” he remembers, speaking from a nearby corner. “It was leave or go to jail.” He says he stopped making the warehouse his permanent sleeping quarters but still comes back every few days for a rest: “That is my home; I live there.”

The squatters’ eviction, however, will be effected not by cops or even a court order, but rather by jackhammers and sledgehammers. Each day, the construction crew blasts forward, smashing up concrete and brick into large piles. With every downed pillar and wall, the debris inches closer to the community’s rooms.

In the marching piles of rubble lie remnants of the most formidable barrier to the new New York Avenue. Every D.C. political hack from Lady Bird Johnson to John Ray has heralded the potential in spaces like this warehouse and others stretching east from North Capitol Street to the Maryland line. Auto dealerships, discount marts, roller-skating rinks, and the inevitable office/retail development, the hype has always gone, would locate along the strip if only the city laid the groundwork.

Without much help from downtown, however, developer Douglas Jemal is trying to turn the warehouse into a retail gold mine. In the process, he’s helping the District around a tight corner. Unlike the generation of schemers before him, Jemal and his jackhammers are bringing the oversized, underperforming strip something it desperately needs: frenetic activity. Even if he never lures a Home Depot into the building, his $5 million investment is paying off by shaking some of the cobwebs not to mention the shooting galleries off of lonely old New York Avenue.

Few fond memories about the squalor of the warehouse come from its reluctant residents. Even at its least dreadful, the place was a haven for addicts and criminals, folks who doggedly protected their turf and pissed on their neighbors’.

The only break from that life, says Michael, came about five years ago, when he saw two babies being born in the warehouse.

“Very, very sad moment for babies to be born there,” says Michael. Suddenly, he says, the rules of engagement among boarders changed. “Dope fiends got compassion. We stole every day to take care of them.” Michael says he and the other addicts eventually decided the warehouse was no place for a couple of babies and sought out a woman in Southeast to take care of them.

It was a good thing, too: In its late-’80s misery, the building denied entry to no one. In those days, the place was known as “the Hotel” and was controlled by a gang that made its headquarters across the street. Dealers would run money and drugs from the storefront to the addicts in the Hotel.

When you walked into the Hotel, you were first hit with an intense urine-and-feces stench. “They would take buckets and defecate in there, urinate in beer bottles. They just shit all over the friggin’ place,” says a city inspector who visited the warehouse at the time. “The toilet bowls were destroyed, others were stolen, others were filled with shit it just overran. When they couldn’t conceivably squat over [the bowl], they dropped it on the friggin’ floor.”

If you could stomach the scent, you worked your way toward the dealers waiting in rooms. Men clutching guns would guard them, watching from the corners of each floor, says D.C. cop Wayne Stancil. You’d stumble past the homeless and the addicts shooting up, the prostitutes working in the shadows that passed for private spaces.

Dealers in the Hotel always on the lookout for undercover cops employed all kinds of gimmicks to avoid getting busted. One dealer, whom everyone called “Monkey Man,” had the most creative scheme, says Stancil. Monkey Man, who ruled the hotel from ’88 to ’91, would have buyers pay him to guess where the drugs in a room were. If they guessed right, Monkey Man would get to keep their money. Stancil said he was almost impossible to prosecute because buyers were paying for a guess, not drugs.

Once you got the dope, you shopped for a place to do it. Addicts constantly fought over rental stalls, some of which were equipped with candles, mattresses, hot plates, and frying pans for cooking the drugs. “If they were tough, they could keep their corner,” Stancil says. “If you wanted to take care of business, you wanted to get one of the corners. If you didn’t know anybody or couldn’t buy a corner, you couldn’t stay there and smoke up.”

At any given time there were about a dozen folks smoking up (although more probably lived there), Stancil says. According to James Berry Jr., chairman of the area’s advisory neighborhood commission, homeless residents of Capitol Hill’s Community for Creative Nonviolence shelter were referred to the warehouse by word of mouth as a place to shoot up. “Everyone knew that,” Berry says. “The place was just eroding. It got to the point where it was literally outrageous.”

Stancil says the Hotel was one of the most dangerous places to make arrests because it was so big. It could take hours to search the building. Stancil explains that his unit boarded up the place at least four times, with little success in preventing residents from coming back.

In the mid-’90s, a dead body was found outside in the tall grass. An inspector from the D.C. Department of Consumer and Regulatory Affairs tracked down the owner of the building, R. Donahue Peebles, and sought to close it down. Through a joint effort with the police, the building was blockaded in 1994.

In its post-blockade incarnation, the building’s lot then became a landfill. Berry says the site became a dumping ground for construction crews building the MCI Center, who would trek over to dump their dirt and debris. The piles of mud and metal pulled from the brilliant new D.C. being erected just blocks away got as high as two to three stories. Area kids used the heaps as a playground.

Erected before World War I, the People’s warehouse was built to last a couple of centuries. It was a study in industrial ego, jutting out to 1st Street NE like a brick fist. Window openings boasted intricate lintels, and a parapet capped the roof like an iron-and-brick crown, complete with cannonball finials. Inside, dozens of concrete pillars shaped like fat wine glasses held up the joint. Spiral staircases and elevators provided access to huge open areas that gave way to windows overlooking the entire city.

The warehouse prospered along with the People’s chain. Between 1929 and 1956, it grew from a two-story space to 370,000 square feet, about a half-block. The building provided an anchor for the city’s quasi-industrial base. The surrounding area was home to Embassy Dairy, Thompson Dairy, General Truck Sales, Crusty Pies, Senate Dodge, an oil company, and about 40 small commercial establishments.

“It was just loaded, just loaded,” remembers Eric Herson, owner of nearby Herson Glass. “That whole area did nothing but produce money.” Herson remembers the corporate scramble to defend the warehouse when the riots broke out in D.C. in ’68. Edgy executives, he says, rode around all night in a battalion of limos with shotguns sticking out the windows.

They were protecting the building, but they couldn’t save the city’s reputation. Almost immediately after the riots, the money pot dried up. Everyone left.

Herson says simply that the companies ran out of land, and businesses couldn’t cope. “The sad thing is that, of that whole area, we’re the only fools left,” Herson says. “The Beltway sucked a lot of companies out to the suburbs.”

But even in the mid-’60s, before the riots pounded nails into its coffin, New York Avenue seemed doomed. A measure of its desperation came in 1966, when Lady Bird Johnson’s Committee for a More Beautiful Capitol helped secure $100,000 in trees to patch the corridor’s blight. Seedy businesses soon found themselves blocked out by honey locusts and Japanese pagoda trees. That same year, a road-widening effort sank literally when 125 feet of the strip plunged about 2 feet into the ground.

The avenue’s misfortune eventually caught up to the warehouse. Warehouse workers in March 1974 struck over wages and working conditions. In pursuit of their paychecks, they smashed windows and forced their way into the building. Two strikers were shot by a private security guard. Before the year was up, People’s had left the warehouse for Alexandria. For the first time since the early 1900s, the building was vacant.

By the ’80s, with the help of Reaganomics and the cocaine epidemic, homelessness had taken off in the District, filtering into the warehouse, among other squatters’ refuges.

When Richard Monteilh, the city’s director of housing and community development, arrived on the job a year ago, he put the warehouse on his short list for demolition. It had been vacant for more than 20 years, and it had a reputation. “Something had to happen there,” he says. “If it wasn’t going to be used, we would consider demolishing it.”

Perhaps that’s what John Ray should have considered a few years back. In a controversial proposal for the corridor’s redevelopment, the former D.C. councilmember and mayoral candidate had called on the federal government to sponsor a development partnership modeled on the famed Pennsylvania Avenue Development Corp., which redid much of downtown. Neither the feds nor Mayor Sharon Pratt Kelly went for the plan.

Momentum shifted as developers began talking up a downtown entertainment and tourism renaissance. The completion of the MCI Center and plans for a new convention center prompted Jemal to buy the property from developer Nick Antonelli.

Jemal says he had been interested in the property for five years. “I decided to do it because it’s six-tenths of a mile from the new convention center,” he says. “I decided to do it because it’s five-tenths of a mile from Union Station. It happens to be a site that comes into the gateway to the city.” Jemal is also banking on a new Metro stop to be built along Florida Avenue.

Jemal may be dreaming, but at least his vision is more realistic than other proposals for the corridor. The New York Avenue Task Force, a group appointed by then-Mayor Marion Barry to forge a development strategy for the corridor, is advocating an underground tunnel connecting downtown to the Maryland border. To top that, it has plans for a 22-acre underground parking deck.

Whether or not those projects germinate, Jemal is confident the warehouse can thrive again. “Build it and they will come,” says the developer. “If there’s something there, they will stop.”

For now, though, the only folks who are stopping are the holdovers, the squatters. A security guard explains they will be gone by the end of January, when work begins on the warehouse’s east wing. Michael, meanwhile, says he still crashes at the warehouse a few times a week. He has already picked another building for squatting once the debris gets too close.