"Must use PackageReference"

I'm trying to reference Azure.Identity with Paket (paket.dependencies):

nuget Azure.Identity

But it has dependencies (paket.lock):

    Azure.Identity (1.3)
      Azure.Core (>= 1.6) - restriction: && (>= net40) (>= netstandard2.0)
      Microsoft.Identity.Client (>= 4.22) - restriction: && (>= net40) (>= netstandard2.0)
...
    Microsoft.Identity.Client (4.24) - restriction: || (&& (>= net40) (>= netstandard2.0)) (&& (>= net45) (>= netstandard2.0))
      Microsoft.Windows.SDK.Contracts (>= 10.0.17763.1000) - restriction: >= net461
...

This all works well when referencing packages, but then when I try to build the project, it fails with an error:

A:\MyProject\packages\Microsoft.Windows.SDK.Contracts\build\Microsoft.Windows.SDK.Contracts.targets(4,5): 
error : Must use PackageReference

Possible workaround is to put the code to a separate dll not using Paket but dotnet, and then reference that dll from the main project.

Start with paket.dependencies and paket.lock, then inspect the referenced Microsoft.Windows.SDK.Contracts build target at packages/Microsoft.Windows.SDK.Contracts/build/Microsoft.Windows.SDK.Contracts.targets. Reproduce the build using Azure.Identity and Paket, and determine the supported dependency behavior. Done means the project builds without moving this dependency to a separate dotnet-managed DLL.