I think the relevant part of the error is:
NMAKE : fatal error U1052: file 'sme.5.0.0151622166024464.makefile'
Do you get the same error if you goto Tools>Options Global>Compiler and press the Verify button?
If Verify fails, does the mentioned .makefile exist in your build directory (C:/Users/alexj/AppData/Local/Temp/WolframSystemModeler-5.0.0)?
Some antivirus software have special treatment of the temp directory, you could try to switch to custom build directory outside of temp by going to Tools > Options Global > General and select an existing directory that you have write access to as custom build directory.