The game has already been through three engines, it's been in development almost 5 years and is due out this year. Nintendo likely picked it up because it was almost done and could be polished up and released quickly and cheaply.
And UE3 it's self is capable of far better visuals than Devil's Third, at least 3.9 is (tho I don't know any actual game that actually uses the latest version of UE3 most use 3.5 or a highly modified earlier version) just look at the 2010 Samaritan demo. Graphics clearly just aren't a priority for the game. There is no point rewriting UE4 to make it compatible with the Wii U when you could just modify UE3 to have the features you want with less effort anyway. The main benefits for UE4 is the better tools and workflow for creating content and implementing systems (work that is already finished on Devil's Third) as well as out of the box support for the latest platforms which if you have to rewrite it to support older architecture is a disadvantage compared to UE3 which supports it with only minor modifications.
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