Probably not the correct solution but now it builds...
<LocationPath Condition="'$(Configuration)' == 'Debug'">..\$(ProjectName).Schemas\bin\$(Configuration)</LocationPath>
<LocationPath Condition="'$(Configuration)' == 'Release'">..\..\Binaries</LocationPath>
In addition I had to add the build account to Administrators group and restart the build service to get rid of light.exe errors.
_light.exe: Error executing ICE action 'ICE01'. The most common cause of this kind of ICE failure is an incorrectly registered scripting engine. See
for details and how to solve this problem. The following string format was not expected by the external UI message logger: "The Windows
Installer Service could not be accessed. This can occur if the Windows Installer is not correctly installed. Contact your support personnel for assistance."._
Btw the URL in the error message is incorrect