1. Go into your SysWOW64 folder under C:\Windows or wherever you have it at.

2. Replace the files c2.dll and cl.exe with the ones under the bin folder of your Visual Studio directory. For me it's under (C:\Program Files (x86)\Microsoft Visual Studio 12.0\VC\bin). You might want to make backups of those files.

That's all you need to do in order to compile the engine. The problem is that those files under SysWOW64 are horrendously outdated, and since it's the folder Visual Studio looks at for those files you just need to replace them with the newer versions.

=Fixing Error S1023 for DirectX SDK=