The crisis engulfing China Evergrande Group EGRNF 6.68% deepened, as the embattled property developer said it had been ordered to tear down dozens of buildings on an extravagant man-made island in southern China.

At the same time, Evergrande released data showing its much-publicized financial stress had largely halted sales of new homes, depriving it of an important source of cash. Contracted sales dwindled to about 720 million yuan, the equivalent of just $113 million, between mid-October and year-end, the company’s figures showed.

The buildings were part of an ambitious project known as “Ocean Flower Island,” an artificial archipelago that the developer has compared to Dubai’s Palm Jumeirah. The Ocean Flower development encompasses houses, hotels and other features, including a roughly 1.1 million square foot convention center built to resemble giant blooming peonies.

In a statement Tuesday, Evergrande confirmed the order to demolish 39 buildings. The notice, issued by local authorities in the island province of Hainan along China’s southern coast, had previously circulated on social media and been covered by Chinese media.

Sales DropEvergrande expanded aggressively for years​before its financial problems mounted and​people stopped buying its homes.Evergrande’s yearly contracted salesSource: the company100 billion yuan = $15.7 billion.
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Authorities in Danzhou, a city in Hainan, ordered a subsidiary of Evergrande to demolish the cluster of buildings, according to a notice dated Dec. 30. The notice said the developer had illegally obtained permits and ordered it to knock down the buildings within 10 days or face a forced demolition. Evergrande has 60 days to file a potential appeal.

“The company will actively communicate with the authority in accordance with the guidance of the decision letter and resolve the issue properly,” Evergrande said in a stock-exchange filing. It stressed that the decision only applied to a single plot on one of the islets that makes up the Ocean Flower archipelago.

Danzhou’s government said in a report last month that Ocean Flower Island had harmed the marine environment, partly by causing mass damage to coral reefs. The city previously ordered construction and presales of the 39 buildings to stop in May 2020, according to a Dec. 27 statement.

Evergrande, which had amassed roughly $300 billion in liabilities as of June 30, has been struggling to meet its obligations since the summer, and to finish building homes that it has presold to many home buyers.

Evergrande said Tuesday its contracted sales totaled the equivalent of $69.7 billion in 2021, a near-39% drop from a year earlier, and far below its full-year target. Contracted sales, which reflect new contracts signed with home buyers, are a widely watched industry measure.

Evergrande’s shares, which had been halted Monday ahead of the company’s statement, rose 1.3% on Tuesday after trading resumed, to 1.61 Hong Kong dollars per share, or the equivalent of $0.13. The stock had fallen 89% last year.