After much troubleshooting I figured it out. I upgraded .Net SDK from 10.2.2 to 10.3 and got the same error.
When you build a project in 10.1 - 10.2.x, VS uses the following file to build the .esriaddin "C:\Program Files (x86)\MSBuild\Esri\ESRI.ArcGIS.AddIns.targets". After the 10.3 SDK install, ESRI removed this file and replaced it with "C:\Program Files (x86)\MSBuild\Esri\ESRI.ArcGIS.AddIns.11.targets"
FIX
The easiest option to fix is to make a copy of ESRI.ArcGIS.AddIns.11.targets file into the same directory and rename it to: ESRI.ArcGIS.AddIns.targets
This way old and new projects will build.