Peoples Drug Stores and a nonprofit community development group will break ground next week for a new drug store at Florida and Georgia avenues NW, a low-income area infested with drugs and still scarred by the 1968 riots.

The drug store will be on the southwestern corner of the busy intersection, on land vacant since the stores there were destroyed in the riots that followed the assassination of the Rev. Martin Luther King Jr.

The community group, the Peoples Involvement Corp., purchased the lot three months ago from the city's urban renewal agency for $240,000. The store, which will be 10 blocks from the nearest full-service drug store, will be in an area of boarded-up buildings and vacant lots about a block from Seventh and T, one of the city's most active illicit drug centers.

"We decided that since the mayor designated that area the 'Howard University gateway north' several years ago that we wanted to develop that corner to facilitate development down Seventh Street, U Street and Georgia Avenue," said Andre'e Gandy, PIC's executive director. Howard University is a few blocks north. "One of the main goals of PIC has always been to encourage development in economically poor areas of the city," Gandy said.

"As far as we're concerned it's just a straight rental/lease agreement that we have with the owner of the building PIC ," said Joseph Pollard, vice president for public relations for Peoples Drug Stores.

"We see that as a good location because there are a lot of people who live there . . . . We see it as a community benefit, but it's for our own business, too. Hopefully we're going to make a profit," Pollard said.

Peoples Drug has 39 stores in the District, 14 of which have opened since 1981, he said.

The project will cost about $1.1 million. The land and store will be owned and managed by a PIC subsidiary, Gandy said.

Financing for the project includes a $555,000 loan from American Security Bank and a $180,000 grant from the U.S. Department of Health and Human Services.

"We consider Peoples [Drug Store] a pioneer tenant because that area has not yet turned around," Gandy said. Peoples has agreed to sign a 20-year lease.

PIC, founded 18 years ago, was foundering a few years ago, but has now embarked on a series of ambitious development projects.

In May, PIC plans to begin construction of a $3.6 million, three-story office/retail complex on the northwestern corner of Florida and Georgia avenues, Gandy said.

"We already have one national shoe store chain that has agreed to lease space there, and we're talking to several other well-known stores," she said.

The Gospel Spreading Church owns the land, and a subsidiary of PIC will develop it, she said.

One block south, at Seventh and T streets, PIC plans to renovate the long-abandoned Dunbar Theatre into a small mall with "a few eateries and one master lease tenant for the top floors," said Karen Kollias, who resigned last week as development director for PIC to take a job with a local bank. No financing has been secured for that project.

Other development projects planned by PIC include renovation of a nine-unit vacant apartment building at 512-514 U St. NW, which the group bought in the fall of 1984. PIC also bought five abandoned houses in LeDroit Park that were owned by Howard University.

"We've renovated three of the houses, which we are reselling," said Gandy. "One has already been sold . . . . We lost money on that project, though."

The other two houses are zoned commercial, and PIC will begin renovating them this year to sell as commercial space, she said.

Last summer the group bought a 53-unit vacant apartment building at 2523 14th St. NW.

"We're still arranging financing to renovate that property to turn it back into housing," Gandy said.

PIC has a staff of 18 people at four office locations, including a word processing training center. Last week PIC opened another office for a Commercial Revitalization Program, which is a partnership between PIC and the city's Office of Business and Economic Development to provide loans and other assistance to businesses along Georgia Avenue NW.