Just like the safe in this area (I have written a guide for that too, click here for it) you find this by trying to find the Runes in the Flooded District Sewers Area using the hearth. This guide explains which is the better option and how to defeat Granny Rags should you choose to do so.
There is one option that is better than the other. If you choose to help slackjaw and eliminate Granny Rags, which you can non-lethally, you get a bunch of money and the loot you would get from helping Granny Rags make Slackjaws a part of her meal. And if you are doing a nonlethal playthrough of Dishonored as I am you don’t even have a choice in the matter, you have to eliminate Granny Rags.
Eliminating Granny Rags
To start the process go into stealth mode and choke her out. Quickly run to the rock on which Slackjaws is as rats appear where you choke out Granny Rags. Next use your time stop ability to get to the top and burn Granny Rags’ Cameo. You have to choke out Granny Rags one more time. She spawns right outside the furnace room to the right on the walkway. I used another time stop, but you can also sneak up on her and choke her out.
All you have to do is kill Slackjaws, release him from his chains and throw him into the soup. Then Granny Rags gives you her key with which you can get her presents.