Yep, my bad. The short story is that I have to robustify the make_pdf command in LaTeXTools (which is invoked when you do a build).
The longer story is that (1) tex complains that it cannot encode a character (the apostrophe, as you correctly state), and copies the offending character in the log file; then, (2) Python throws a Unicode error when it encounters that character when parsing the log file.
I think in this case the right thing to do is to parse the log file telling Python to ignore characters it can't encode. However, more generally, I must also make sure that the build command never fails silently. I'll try to fix this ASAP.
As a stopgap measure, sometimes you can get some insight into what went wrong by looking at the console (Ctrl+`); LaTeXTools spits out a lot of debugging info there, and of course any Python error messages appear there, too.