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Antenna subarray formation is a novel RF preprocessing technique that reduces the hardware complexity of MIMO systems while alleviating the performance degradations of conventional antenna selection schemes. With this method, each RF chain is not allocated to a single antenna element, but instead to the complex-weighted and combined response of a subarray of elements. In this paper, we derive tight upper bounds on the ergodic capacity of the proposed technique for Rayleigh i.i.d. channels. Furthermore, we study the capacity performance of an analytical algorithm based on a Frobenius norm criterion when applied to both Rayleigh i.i.d. and measured MIMO channels.