The tree is found just northwest of the bridge, by the path south of Rellekka. Chopping down the tree will reveal a Strange chest in the stump. Pick up the chest. It is locked and appears to have no keyhole or other way to open it. Return to Koschei the deathless, he will immediately know that you have found a chest, before you have a chance to tell him about it. He says that this is because he feels some connection with the chest. He will unlock the chest, revealing a toy ship inside.