Spatial time-frequency distributions (STFDs) have been previously introduced as the natural means to deal with source signals that are localizable in the time-frequency domain. Previous work in the area has not provided the eigenanalysis of STFD matrices, which is key to understanding their role in solving direction finding and blind source separation problems in multisensor array receivers. The aim of this paper is to examine the eigenstructure of the STFD matrices. We develop the analysis and statistical properties of the subspace estimates based on STFDs for frequency modulated (FM) sources. It is shown that improved estimates are achieved by constructing the subspaces from the time-frequency signatures of the signal arrivals rather than from the data covariance matrices, which are commonly used in conventional subspace estimation methods. This improvement is evident in a low signal-to-noise ratio (SNR) environment and in the cases of closely spaced sources. The paper considers the MUSIC technique to demonstrate the advantages of STFDs and uses it as grounds for comparison between time-frequency and conventional subspace estimates.